(Repeats to additional subscribers)
By Catherine Ngai and Liz Hampton
NEW YORK/HOUSTON Oct 6 Robust Asian demand for
West African crude is fueling a worldwide surge in shipping
rates for the largest oil tankers that is being felt from
Houston to Singapore.
Chartering rates for Suezmaxes and very large crude carriers
(VLCCs) have recovered rapidly in recent weeks after plunging to
their lowest in more than year this summer.
The spike in rates comes as Asian refiners return to the
market after a seasonal turnaround period, and as several key
streams of West African crude are finally loading for export
after supplies were constrained because of pipeline disruptions
The higher rates, which imply fewer imports into the United
States, could support benchmark oil prices in coming weeks.
Increased demand from Asia for this crude has tied up ships
and barrels that might have otherwise moved to the United
States. The higher prices are leaving brokers and traders
scrambling to secure vessels, particularly for common routes
from West Africa to the U.S. East Coast or Western Europe.
Chinese loadings of West African crude are set to average
1.1 million barrels per day in October, the highest since April.
The interest in Suezmaxes comes at a time when two key West
African crudes, Nigeria's Qua Iboe and Forcados, return to the
global market after a months-long force majeure. Rebels hit a
sub-sea pipeline operated by SPDC, an affiliate of Royal Dutch
Shell, in February, forcing the company to stop exports
of the Forcados stream of oil.
Exxon stopped exporting Qua Iboe in July after a leak on the
line feeding oil to the export terminal.
On Tuesday, Reuters tracking data showed that the first
cargo since July of Qua Iboe loaded at a local terminal.
"Nigerian loadings are now scheduled to reach some 1.9
million barrels per day next month. The pick-up has had a clear
effect on freight markets," JBC Energy said in note last week.
Nigeria exported some 1.4 million bpd in September.
Transporting oil on larger vessels is more cost effective,
especially for longer voyages.
In September, Suezmax volumes rose by nearly 60 percent from
August, according to one ship broker, pushing the rates for the
popular West Africa-to-United Kingdom route up to 110 percent of
the World Scale, a shipping rate benchmark. In August, that
route was as low as 35 percent, another broker said.
That rate has since leveled off this past week but remains
The spot rate for a Suezmax from the U.S. Gulf to Japan or
South Korea is around $3.5 million, brokers say, more than
double the rate for the same route two months ago.
Meanwhile, VLCC fixtures for October loading from West
Africa are up 50 percent month-over-month, the first ship broker
said. Last week, a VLCC moving from the Caribbean to Singapore
was priced at about $3.85 million, up from $3 million just a
week prior, a third broker said.
With higher rates, fewer imports could come into the U.S.
East Coast and Gulf Coast, reducing overall inventories. That
could boost oil prices as refiners draw from existing storage,
U.S. crude imports in October are expected to be the lowest
since September 2015, according to preliminary data from Thomson
Reuters Eikon's shipping data.
While the Suezmax market softened slightly this past week,
more opportunities in coming weeks should limit further
downside, according to a note from shipbroker Charles Weber Co
available via Capital Link Weekly on Thomson Reuters' Eikon,
citing the resumption of additional exports.
(Reporting by Liz Hampton in Houston and Catherine Ngai in New
York; additional reporting by Libby George in London)