Record US crude exports to Europe power tanker rally

A torrent of crude flowing from the US Gulf coast to Europe in October helped midsize tanker rates triple in the span of a month as seasonal US refinery maintenance and record oil output made more crude available to export.

Europe-bound crude departures from the US Gulf coast climbed to a record 2.2mn b/d in October, according to preliminary data from analytics firm Vortexa, up by 300,000 b/d from September and up 600,000 b/d on the year. At the end of the month, the Suezmax rate to Europe hit an 11-month high of $4.45/bl for WTI, and the Aframax rate to Europe hit a six-month high of $6.25/bl for WTI,according to Argus data.

Over the same time, Europe-bound crude departures from Brazil and Guyana ticked lower from September by 4pc and 8pc to about 375,000 b/d and 195,000 b/d, respectively, according to Vortexa.

Fall maintenance season kept US refinery utilization at 86pc of capacity in the four weeks ended 27 October, according to the US Energy Information Administration, making more crude available for export. US crude production held at a record high through the first four weeks of October at 13.2mn b/d, according to EIA data.

Additional export support came from European onshore crude inventories, which were the lowest level in at least four years at about 455mn bl on 30 October, Vortexa data show.

Spot assessments for prompt delivering WTI to Europe hit an 11-month high on 5 October of $3.05/bl above North Sea Dated, providing plenty of incentive for speculative traders to buy on an fob basis and sell to European buyers, despite rising fob costs on an Ice Brent basis. Also, the Dated-to-Frontline swap — which measures the premium of North Sea Dated to Ice Brent futures — rose to a 14-month high of $2.58/bl on 28 September and remained close to that level through early October.

Europe's increasing reliance on WTI follows EU sanctions placed last December on Russia, previously the continent's biggest supplier of crude. Since then, European refiners have had to source their crude from farther afield, exerting upward pressure on freight rates. Ton-mile demand in October for Europe's crude imports was up by 5.7pc from October 2022, prior to the sanctions, and up by 28pc from October 2021, before the war in Ukraine, according to Vortexa data.

Through October this year, the US has been the biggest crude supplier to Europe, sending about 1.7mn b/d, equivalent to 17pc of the continent's imports, Vortexa data show.

By Calder Jett and Tray Swanson