Gibson Shipbrokers looked at this problem and tried to answer the question - where should owners position their tonnage for the balance of the year? The Atlantic, the Middle East, or the Far East?
Taking the Atlantic, traditionally the focus has been on US driving season. US buying activity has picked up over the past month, with imports in the US Gulf and Atlantic coasts recently hitting a seven month high, as traders replenish stocks ahead of peak demand season.
However, with higher domestic refining runs, and stock builds well under way, is there really much prospect for significant buying to lift freight levels substantially over the coming months? The hurricane season is of course, always a wild card, Gibson said.
The focus therefore shifts towards West Africa and Latin America. With elections coming up next February, the Nigerian Government is focused on keeping gasoline stocks inflated. However, with shore-based inventories full and floating storage high, imports maybe constrained.
Buying activity could remain erratic, occurring as an when NNPC can accommodate more product imports.
The issuing of the delayed crude for product swap quotas should also be supportive of product tanker demand, as more independent offtakers participate in import activity, the broker said.
In recent years, Latin America has proved to be the primary outlet for US refined products. However, this demand could be threatened.
Higher prices have forced the Brazilian government to introduce subsidies, increasing the differential between local and international prices, potentially complicating products trading into the region in the short term.
Mexico, which has been particularly reliant on the US over the past few years, is on a drive to reduce it’s import dependence. In April, the country lifted gasoline, diesel and kerosene production to 463,000 barrels per day, the highest in nine months, as the Salina Cruz refinery came back online.
If refining runs continue to grow, US exports to Mexico could come under continued pressure for the balance of the year.
In crisis stricken Venezuela, refining runs will continue to fall; however, the impact on product import demand is likely to be constrained by the country’s ability to pay for supplies.
These factors combined signal that buying activity may be different for the balance of 2018, compared to 2017 activity levels, Gibson concluded.