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Industry Opinions

 

Removal of Brazilian Subsidies to Back Out Clean Product Imports?
November 01, 2013
Brazilian transportation fuels subsidies have reduced costs for consumers, who have enjoyed longstanding market discount for gasoline and diesel. Currently the cost of the subsidy is borne by the state run oil company, Petrobras. As the cost of these imports is rising, the company is pushing for an end to price controls, a move which could reduce demand for clean product imports. Historically, until around 2010, Brazil faced a narrow gap between domestic demand and refining capacity, resulting in a modest amount of clean product exports. However, a trend of increasing miles driven per light duty vehicle has started rising quickly: 9,000 km/year in 2010, with forecasts of 13,000 km/year in 2015. The resulting increase in domestic demand was met by clean product imports, which peaked in 2011.
 
Caribbean Aframax Seasonal Hike Ahead?
October 24, 2013
Earnings for TD9 have been the highest average year to date, $12,700, since 2010 and compare very favorably to the 2011 average of $4,200. A rare Aframax summer surge was driven by delays at ports in the US Gulf and an increase in lightering work following the most recent Motiva outage in the mid-summer months. Owner resistance has been firm this year for earnings below $5,000/d or WS 80, helping maintain a floor for rates. Rates had approached that floor level very recently with several prompt ships in the region. But can owners look forward to the potential for a late season earnings jump?
 
Going GovernMental: EIA Closure and Reopening
October 18, 2013
Collecting oil inventories and trade flow data at a government agency is particularly challenging – especially when your agency has shut down. Although the United States government is now back in business, the closure left the financial oil trading community without its weekly benchmark – the Department of Energy’s inventory report. For these traders, correctly anticipating weekly movements in oil inventories can prove to be quite lucrative. The Energy Information Agency (EIA) within the Department of Energy (DOE) reports weekly data which is based on initial estimated volumes that are then revised over the subsequent two months. As such, the weekly benchmark tends to be more of a barometer of market sentiment rather than a reflection of physical reality.
 
Bunkers stable in 2013, ECA Changes ahead in 2015
October 10, 2013
Worldscale released their estimated bunker prices for 2014 this week. Over the past year prices have fallen from $686/t to $632/t for high sulphur and $779/t to $713/t for 1% low sulphur. Bunker prices have been highly volatile since 2009, when they rose from the mid $200/t range to the mid $600/t range by 2011 for high sulfur grades. In addition, during this time spreads ranged from $197/t in 2011 and $181/t in 2012 with a wide range of deviations from the average, making timing of purchases critical. However, in 2013 prices stopped their climb and have held near their year to date average of $607/t in the key bunkering ports of Rotterdam, Houston and Singapore. The steadying prices in 2013 have helped reduce the uncertainty in operating expenses for ship owners.
 
RSVP to the Pool Party
October 04, 2013

Depressed freight rate conditions in the early part of the last decade saw the creation of the first tanker pools. By consolidating assets and commercial operations, individual ship owners streamlined chartering functions, bunker purchases and other redundant efforts in order to reduce costs. By joining a tanker pool, small-fleeted shipowners were afforded participation in elusive chartering opportunities, such as coveted contracts of affreightment with large oil companies that were traditionally covered by larger competitors. Throughout the past decade, tanker pools have gained popularity across all tanker segments. The birth of new pools sparked competition as pool managers sought to attract new tonnage through unique commercial visions. Last week, Ocean Tankers announced its intended departure from Maersk’s Nova Tankers pool raising some questions about the popularity of tanker pool participation. With market fundamentals historically weak, shipowners and pool operators are now faced with a new set of factors influencing tanker pooling decisions.
 

 
Jones Act - Still the king of rates in 2016?
September 26, 2013
In today’s market Jones Act tankers command a significant premium as few ships are available in the face of overwhelming demand and tight supply. 34 MR’s and 42 coastal barges of 130,000bbls or larger represent the current US Jones Act Fleet. However, future supply may not be as tight as many orders have been hitting US shipyards. There are at least 10 medium range tankers on order, two large ATBs, and the possibility of an additional five to eight tankers to be built at Avondale. These orders will represent a sizable addition to the US flag tanker fleet over the next three to four years, which will help increase the liquidity in both the spot and relet markets.
 
USAC-Born Exports reaching new heights
September 19, 2013
A recent uptick on the US Atlantic coast refinery usage has led to an increase in cargoes loading out of the region. Owners discharging gasoline from Europe or Caribbean Jet fuel would historically ballast back to Europe, or sought a backhaul cargo out of the US Gulf. But as US domestic crude production continues to disrupt clean product trades, a new trend is emerging; an increase in exports from the US Atlantic coast. The US Atlantic coast remains a niche export market, with a nominal refinery capacity of around 900,000 bl/d vs 9.2 mn bl/d in PADD 3. But even with this modest capacity, a good month can see ten additional cargoes loading from the region during the early spring to late summer. In May and June of 2013 a total of 50 cargoes loaded in this two month period, verses 26 cargoes during the same period in 2012.
 
S.P. aRe Becoming Irrelevant?
September 13, 2013
The recent flux in light-sweet crude oil supplies in the Atlantic Basin highlights the United States’ recent strides towards crude oil self-sufficiency. Although short-term upward pressure on crude oil prices appears to have temporized for the moment, threats to supply, if only perceived, can have wild impacts. Typically, if crude oil prices get too high, the powers that be in Washington reach for the Strategic Petroleum Reserve (SPR) taps. While the tenet of the SPR is expressly to meet supply shortages, moderating price levels for consuming constituents is certainly an added benefit. According to the US Government, “If hurricanes or other unexpected physical conditions disrupt either crude oil imports or domestic production, the Strategic Petroleum Reserve (SPR) is ready to make replacement oil available to the extent approved by the President and/or the Secretary of Energy.” However, now that the United States is awash in crude oil, the SPR’s utility as a political tool is significantly reduced.
 
Liby-honest: How lost crude oil flows could be a boon for clean
September 06, 2013
Recent developments in Libyan crude oil production, exports and refining are eerily reminiscent of conditions experienced in the spring of 2011, when civil unrest brought crude oil production and export to a grinding halt for several months. Since then, the country has undergone significant political change and, to its credit, restored most of its crude oil export capacity. That is, until recently. Libyan crude oil production has reportedly dropped below 150,000 barrels per day: roughly one-tenth of what is considered to be its true production capacity of 1.5 million barrels per day. The resultant drop in demand for Aframaxes is an obvious threat to shipowners in the Mediterranean, however broader concerns have rippled toward refiners as they struggle to find light-sweet replacement barrels to support refining economics.
 
Adding Fuel to the Eco Ship Fire
August 30, 2013
The historically weak freight environment continues to batter the earnings of tanker companies the world over. The high and low tides of revenue opportunities have introduced a persistent theme of cost control by bringing accute attention to the bottom line. At first, the tightening of the proverbial belt was a concern for charterers as it registered the possibility of slack maintenance – something has got to give, afterall. However now, new technology in the form of eco ships provides a clean opportunity for shipowners to save money without to augment operational integrity.
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