Americas clean tanker demand strong

OREANDA-NEWS. July 29, 2015. Demand for medium-range (MR) product tanker movements out of the Americas will outstrip increasing tonnage supply and may keep rates elevated in the second half of 2015.

US refiners in Padd3 will continue churning out high volumes of oil products for Latin American and European buyers, and for distant customers in west Africa and Asia-Pacific, supporting demand for MR tanker movements out of the US Gulf.

The global MR fleet is expected to grow by around 4pc in 2015 but increased demand-side will support elevated MR freight rates. "The drivers of the MR market in the Atlantic basin in 2H15 will be the same from 1H15: robust US refinery utilization, longer-haul trades to west Africa and the west coast South America, strong exports to Mexico given gasoline shortages there," senior managing director at Evercore Jonathan Chappell said. Growing use of condensate splitters allows higher utilization on growing volume, Stifel director of maritime research Ben Nolan said.

Rate increases for MRs discharging in Latin America have already been significant. The cost of MR freight on the Houston-Pozos, Colombia route hit what shipbrokers believe is a historical high of \\$950,000 lumpsum in early July, after averaging \\$644,000 in the first half and \\$570,000 in the second half of last year.

Refinery problems in Venezuela and elsewhere have driven demand for oil product imports. Significant refining capacity is not expected to be added in the second half of 2015 in Latin American countries, maintaining import demand.

Strong demand for MR ships taking oil products out of the Americas will surpass the considerable tonnage to be added to the market, Chappell forecast. "The supply side is expected to pick up as the industry is currently at the peak of the delivery schedule from the [vessel] order boom of 2013, but demand is far more elastic than supply and as long as the aforementioned demand themes hold, I still look for a strong second half."