Transatlantic Suezmax fixtures show weak European VGO fundamentals


Recent Suezmax fixtures carrying European high sulfur vacuum gasoil across the Atlantic to the US Gulf Coast are testament to how weak local demand for the feedstock is, traders said.

Transatlantic fixtures in the feedstock market usually occur on smaller 50-70,000 mt dirty product carriers, instead of the 120-200,000 mt Suezmax’s, two of which have already set sail and more of which could be fixed if European demand remains depressed, traders said.

Suezmax’s offer better freight rates in $/b than Panamax’s.

So far in July, UKC-USGC Panamax freight for VGO has averaged $2.79/b, compared with $1.11/b on a Suezmax.

July Suezmax freight rates from the USGC to the Mediterranean and Black Sea, however, have averaged to $0.98/b and $1.38/b respectively, Platts data showed.

According to shipping reports and data from the S&P Global Platts trade flow software Cflow, the Los Angeles Spirit and the NS Bora are the two latest Suezmax’s to have taken on surplus VGO with the aim of arbing it to the USGC.

Both vessels loaded via ship-to-ship transfer, the former in Malta and the latter in Kavkaz, Russia.

“In June, there were a few cargoes which couldn’t find a home in the Mediterranean,” one trader said.

The Ice Point Handysize, prior to discharging into the port of Sarroch in the last decade of June had been idle near the Bosporus for around two weeks, a second trader said underscoring the weak market.

“In the past few months there have been a number of unsold handy’s hanging around Malta as western Mediterranean demand was subdued,” the same trader said. “You could see another Suezmax getting fixed if this continued.”

This isn’t expected to develop into a regular trade and only occurs when demand is particularly weak for long periods, another trader said.

Meanwhile in the Platts Market on Close process, BP has been bidding competitively for a cargo of HSVGO delivered into the port of Rotterdam without success.

Another trader said these Suezmax’s leaving the region could alleviate some of the physical length that the charterers were exposed to.

In the US, high arrivals of European VGO could flood the market, causing premiums to fall.

Alternatively, these barrels could be tanked in the Bahamas and released in smaller clips when traders see appropriate market conditions.

Source: Platts

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