World News
"Good Times Ahead" for Product Tankers as Low Bunker Prices Allow For Massive Route Detours
Product tankers moving diesel and jet fuel are taking advantage of low bunker prices to undertake 4,000 mile (6,400 kilometre) diversions around South Africa instead of utilising the Suez Canal, a development some analysts are saying signals "good times ahead" for the sector, Bloomberg reports.
In recent months the price of oil and petroleum products has fallen to multi year lows, and with futures prices higher than the current spot rates, the pressure for quick oil product deliveries has been lifted.
"Low fuel prices make the longer route around the Cape increasingly competitive relative to the Suez Canal," said Erik Broekhuizen of Poten & Partners Inc. (Poten & Partners).
"Another advantage of taking the longer route is that it gives traders more options of where to sell their cargoes."
The longer journeys also have a positive impact on utilization rates, as it keeps ships employed for longer.
Rates for moving diesel and jet fuel are said to be rising, meaning long-range tankers, which can deliver about 80,000 metric tonnes of cargo, can earn $28,735 per day sailing around South Africa, the highest amount since 2010 and 19 percent higher than forecasted at the end of 2014.
The Baltic Clean Tanker Index is said to be sitting at its highest in four years, holding an average of 695 points since January.
Broekhuizen notes that ship owners gravitate toward the longer route because they can keep their vessels employed for longer and sell additional cargoes along the way.
"There's massive demand to move oil products over very long distances," Erik Nikolai Stavseth, shipping analyst with Arctic Securities ASA (Arctic Securities).
"These shipments tell me that there are very good times ahead for product-tanker owners."
Diversions around Africa could reportedly increase if bunker prices continue to slide, which may increase demand for long-range product tankers.
Earlier this year Scorpio Tankers, Inc. (Scorpio Tankers) CEO Robert Bugbee said the product tanker market rebound could last several years.
Key Bunker Prices More
| VLSFO | MGO | |||
|---|---|---|---|---|
| $/mt | +/- | $/mt | +/- | |
| Singapore | 649.00 | 0.00 | 770.00 | 5.00 |
| Rotterdam | 602.50 | 1.00 | 762.00 | 2.50 |
| Houston | 630.50 | 4.00 | 796.50 | 2.50 |
| Fujairah | 648.50 | 0.50 | 900.00 | 4.50 |
| Global 20 Ports Average | 666.00 | 2.00 | 856.00 | 1.00 |
| Global 4 Ports Average | 632.50 | 0.50 | 807.00 | 1.00 |
| Global Average Bunker Price | 715.50 | 1.00 | 893.00 | 8.00 |
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