17-04-07

Trans-Atlantic freight rates for gasoline tankers will be supported by an expected spike in demand for European gasoline from the US, ship brokers say. Dwindling US gasoline stocks as a result of a number of planned and unplanned refinery glitches are said to be prompting US buyers to look to Europe and, as a result, the reliability of US refineries will be key in determining the flow of gasoline.
"The expectation of arbitrage cargoes in light of US gasoline stocks registering their ninth consecutive fall to hit a 17-month low appeared to give rates some support," London-based broker Simpson, Spencer, Young said in a weekly report.

It said rates for trans-Atlantic tankers have slipped slightly to around WorldScale 320 for 37,000 ton cargoes but felt the arbitrage would offer support. Shipbroker E.A. Gibson attributed the movement of European gasoline to the US on the fact there is little spare capacity.
"The (US refining) industry is highly sophisticated and running at close to full capacity," said E.A. Gibson in a weekly market report. "Given this, any glitch in the system can result in substantial 'losses' in product output, especially of gasoline."
"The two components of strong demand and full capacity refining means that such 'glitches' result in additional import requirements and typically a sharp upturn in UK Cont-US trade," it added.

As a result, already high freight rates could soar.
"Even if the fundamentals suggest earnings of around $ 20,000/day, two spikes in one year close to recent developments could push annual average earnings to some $ 25,000/day," E.A. Gibson said.
But the backup in gasoline production in the US looks set to be alleviated to some extent by the partial restart of Valero Energy's McKee refinery in Sunray, Texas. The restart will be gradual, but the company is holding to its expectation that the 158,000-bpd refinery will be operating at half of that capacity by the end of April.

The Texas Panhandle refinery has been shut since a Feb. 16 fire.
The fire broke out in the propane de-asphalter unit and badly damaged a pipe rack, which is instrumental in distributing crude oil throughout the plant.