Fuel Fight

1 Feb 2019; 

For many years the product flows in the Atlantic Basin were fairly predictable.  The United States produced surplus diesel and exported this to Europe, which was short diesel.  European refiners on the other hand generated excess gasoline which could be sold to buyers on the U.S. East Coast.  This provided triangulation opportunities for product tanker owners that operated vessels in the Atlantic Basin.  For example, they would pick up a diesel cargo in the U.S. Gulf and discharge it in Northwest Europe.  Ideally, the vessel would then pick up a gasoline cargo at a nearby terminal for delivery on the U.S. Atlantic Coast (USAC).  So far in 2019, an MR voyage from Houston to Amsterdam (38,000 MT) would generate a Time Charter Equivalent (TCE) return of $7,200/day.  Over the same period, the TCE for a voyage across the Atlantic in the other direction, from Rotterdam to New York has a TCE of $11,500/day.  However, if an owner could combine these trips for a triangulation voyage (Houston – Amsterdam – Rotterdam – New York) the TCE for the owner increases to $17,000/day because of the significant improvement in the utilization rate of the vessel.  On a typical ballast back voyage, the vessel is only utilized 50% of the time, while it is empty the other 50%.  On a triangulation voyage as described above, the vessel is only empty 35% of the time, while sailing with a cargo 65% of the voyage.  Increasing a vessel’s utilization is one of the key levers that an owner has to increase profitability (or reduce losses).  However, to make this triangulation work, it is critical that there is a certain balance in the trades going back and forth over the Atlantic.  That is where problems are starting to develop. 

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