Ship & Bunker: Refined Oil Products Stock Build Could Push Up Tanker Rates

2 Feb 2016: “Poten & Partners says that reduced demand for refined oil products may be an unexpected source of relief for the tanker market and could cause rates to escalate this year. That’s because until a refined product surplus depresses prices, the product will be stored close to demand areas – and with on-shore storage filling up in certain parts of the world, ‘traders and oil companies have started to charter vessels for floating storage,’ states the latest edition of Poten Tanker Opinion. “Although Poten acknowledges that reliable data on worldwide commercial product inventory and storage capacity is scarce, it quotes a Scandinavian source who indicates that capacity inSweden, Finland, Denmark, and Norway is full; ‘At the same time, we have seen some unusual activity in the tanker market: both a Suezmax and a VLCC were recently chartered to carry diesel on their maiden voyage from Asia to Europe.’ “Continued growth in refining capacity is said to have created an oversupply of diesel in China, and Poten points out that the arbitrage window to move diesel from the Pacific to the Atlantic is open at the moment despite ample diesel stocks in the Atlantic Basin. “Poten has investigated claims that traders are using product tankers for floating storage, and while it believes it is not happening enough to warrant it being called a trend, ‘it is certainly something to keep a watchful eye on.’ Poten concludes that if demand growth continues to slow, refiners will move products to areas where it can be profitably stored, and ‘this could give the product tanker market, especially for the larger LR1 and LR2 size, a shot in the arm this year.’

“Poten & Partners last September cited another shot in the arm for product tankers moving diesel and jet fuel, in the form of low bunker prices making the longer around the South Africa increasingly competitive tot he Suez Canal.”