Asia demand lifts US VLCC rates to 4-month high

Rates for 2mn bl very large crude carriers (VLCCs) on the US Gulf coast reached four-month highs on 17 May amid elevated Asia-Pacific demand for US crude, especially in China.

The rate to ship 270,000t of crude from the US Gulf coast to China, including $250,000 Corpus Christi, Texas, load-port fees, climbed by 11.6pc from 7-17 May to $10.1mn lumpsum, or $4.85/bl for WTI, the highest level since 12 January, according to Argus data. A surge of demand in the first half of May reduced tonnage in the Atlantic basin as Chinese refiners eye the end of a heavy refinery maintenance season.

Over that span, the time-charter equivalent (TCE) rate, which reflects daily earnings for shipowners, for a scrubber-fitted VLCC hauling crude from Corpus Christi to Ningbo, China, increased by about $9,150/d to $50,613/d, according to Argus data.

Similarly, the US Gulf coast-Rotterdam VLCC rate on 17 May matched its highest level since 11 January, reaching $4.95mn lumpsum, or $2.38/bl for WTI, including load-port fees, after Asia-Pacific demand limited the amount of VLCCs available for shipments to Europe.

The rally comes amid rising onshore inventories of crude in China. Stocks increased to 924mn bl in the week ended 19 May, the most in nearly five months, according to data from analytics firm Vortexa.

"An expected increase in refinery utilization during the third quarter justifies inventory building during (the second quarter), while the current import trend and ongoing refinery maintenance may imply less sharp inventory builds during May-June compared to last year," shipbroker BRS said.

Last year, Chinese inventories of crude shot up to 1.02bn bl at the end of July from about 925mn bl at the end of April, Vortexa data show.

A slower pace of inventory builds may create a less volatile environment for VLCCs compared to last year, BRS said.

By Tray Swanson