To accommodate recent increases in US refinery production, due to the abundance of domestic fracked crude, shipping trade flows have shifted and new markets for these products have been established.
Following the recent coverage of the possible impact of the lifting of the ban on US crude exports, it is time to return to the growth of US product exports and its current impact on the clean tanker market, courtesy of Gibson Research.
This abundance of fracked crude has provided US refineries with an increasing supply of cheap feedstocks. The net input of crude oil stood at 15.3 mill barrels per day a couple of weeks ago, around 875,000 barrels per day more than the same period last year, the broker said in a recent report.
Illustrating the trend, the fronthaul transatlantic MR route has been constantly switching direction since the middle of last year, as export volumes of CPP provided the tanker market with fresh opportunities to improve earnings through triangulation.
However, recent US winter storms and cold temperatures have triggered a large product stock draw, which has left Atlantic Basin inventories at their lowest in six years.
As demand increased, prices for diesel spiked in New York, drawing European cargoes across the Atlantic. This tightening was apparent on the benchmark MR trade from Rotterdam to New York (TC2) where earnings had risen to $16,750 per day by mid-January, up $10,000 per day from the start of the month, Gibson said.
Despite some softening of rates since, the current market strength is the result of the US rebuilding stocks and a high demand for fuels domestically.
For this reason, the backhaul TC14 business was quiet recently. US refinery maintenance could also temporarily erode product exports and it is likely that the reverberations of this will be felt in the transatlantic market.
US products are also seeing increased export volumes to the Caribbean, Latin America and West Africa. Demand is growing in all of these regions with the US now being the obvious supply choice, Gibson said.
West Africa was once an almost exclusive market for European products, but exports from the Continent have halved over the past five years on the back of the contraction of the European refinery industry. Exports to Asia are also expected to follow and the widening of the Panama Canal could give the US additional impetus with larger shipments possible.
Should the US position on crude oil exports change, it is unlikely to have significant impact on the growing products export trade. US shale oil producers want to increase production and cite improved employment opportunities for Americans on the back of this new wealth.
Whatever the outcome of the debate, the US will continue to provide considerable support for the tanker market for some years to come, be it clean, or possibly dirty, or both, Gibson concluded.