US Gulf VLCC rates tumble on influx of tankers

Market: Crude oil, Freight
13/12/23

Rates for very large crude carriers (VLCCs) on the US Gulf coast sank sharply on Tuesday after an influx of available vessels moved into the Atlantic basin throughout November and early December amid Opec+ production cuts.

The bellwether US Gulf coast-China VLCC rate on Tuesday dropped by 9.6pc to a two-month low of $8.45mn lump sum, or $4.06/bl for WTI, including $250,000 Corpus Christi load-port fees, after charterers chipped away at rates throughout the day. The drop is mostly due to a large number VLCCs that recently repositioned to the Atlantic, shipbrokers said, enticed by high rates as Asia-Pacific refiners source more crude from the US Gulf coast and Brazil due to Opec+ production cuts.

A larger than usual number of VLCCs discharging in the Atlantic in the first half of December also has added to vessel supply, the shipbrokers said.

At least six VLCCs were provisionally hired Tuesday and three more by midday Wednesday to transport crude from the US Gulf coast in January, but tonnage still outstripped demand despite the uptick in chartering activity.

With big losses in the US Gulf VLCC market, the premium for time-charter equivalent (TCE) rates on Saudi Arabia-China voyages increased by about $6,000/d to $8,076/d over Texas-China voyages, according to Argus data, indicating VLCC owners may opt for cargoes in the Mideast Gulf after discharging in Asia.

US VLCC demand up by 31pc in May-December

The decrease in rates comes amid elevated VLCC demand on the US Gulf coast this year. Demand has risen significantly since May, when the first round of Opec+ cuts took affect followed by additional unilateral cuts from Saudi Arabia and Russia in July.

Ton-mile demand for VLCCs on the US Gulf coast between 1 May and 10 December was up by 31pc compared to the same period in 2022, according to data from Vortexa, as refiners in east Asia sourced replacement barrels from the US Gulf coast. Additional demand has come from Europe, which has increasingly used VLCCs for crude cargoes from the Americas after the EU banned Russian oil imports in December 2022.

By comparison, VLCC ton-mile demand in the Mideast Gulf, still the global VLCC hub, was down by 6pc between 1 May and 10 December compared to the same period in 2022, according to Vortexa data.

By Tray Swanson

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