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US flexes crude export muscle with first VLCC LOOP load

London (Platts)--19 Feb 2018 1227 pm EST/1727 GMT


The first VLCC to directly load a crude oil cargo from the Louisiana Offshore Oil Port in the US Gulf Coast has been completed, terminal operator LOOP LLC said in a statement Sunday, in a further sign that US crude exports will play a more significant role in the global oil markets.

The appeal for US crude oil is poised to broaden as the freight costs for VLCCs are much lower than smaller tankers and this could spur more global demand for US crude, making it viable for more arbitrage opportunities.

This loading signals a big shift in crude exports out of the US which normally load in smaller tankers like Suezmaxes and Aframaxes.

LOOP LLC confirmed that it "successfully completed the first VLCC crude oil loading operation at its Deepwater Port, 18 miles offshore of Port Fourchon in Louisiana.

Sources identified the vessel as the Shaden; it left the terminal on Sunday, according to S&P Global Platts trade flow software cFlow.

LOOP said the vessel was chartered by Shell. Shell was unavailable for comment.

Shaden is a Saudi Arabian-flagged VLCC owned by Bahri (the top VLCC owner globally) that entered service at the end of 2017.

A spokesman at Bahri was unavailable for comment.

Sources also told S&P Global Platts that the tanker is bound for Asia, with some options to discharge in China.

Shipping sources had said that tanker was booked by China's Unipec and the supplier of the crude was Shell. Representatives at Unipec were also unavailable for comment.

China has emerged as the main destination for US crudes since the then US President Barrack Obama lifted the ban of US crude exports in December 2015.

In 2017, almost 40% of US crude exports have gone to China compared to around 20% the previous year, according to Platts estimates.

Crude oil has been exported on VLCCs from the USGC via reverse lightering operations, with smaller vessels carrying the cargo to load the carriers offshore.

The LOOP terminal is currently the only US port capable of fully loading a VLCC.

Loading a VLCC via lightering typically requires three to four Aframaxes to perform offshore ship-to-ship transfers. Direct loading of a VLCC would cut out the lightering operations.

RISE IN EXPORTS

US crude exports have more than doubled in the past year aided by a surge in US crude production along with a wide spread between NYMEX WTI and ICE Brent, which has created good demand from Asian and European refineries.

Logistical improvements such as this facilitate the movement of crude from the Permian Basin -- the epicenter of the US shale boom -- to Gulf Coast export terminals because of the expansion of pipelines.

Permian output is projected to reach 4.54 million b/d by 2019, up from 2.52 million b/d in 2017, according to Platts Analytics.

The dramatic rise in US oil exports has been a boon for the tanker markets, giving rise to new routes in the past two years.

Oil exports from the US are expected to rise even further this year despite stable imports into the US and tanker owners will be banking on higher traffic from the US to shield them from the current weak environment.

Gibson Shipbrokers recently said the tanker market will rely heavily on the US market for its growth this year.

"To reverse the current fortunes, owners need notable increases in trading demand," Gibson said in its recent weekly report. "At the moment, rising crude exports out of the US is the key area for growth but the industry also needs to see strong gains in exports in other parts of the world."

--Eklavya Gupte, eklavya.gupte@spglobal.com

--Edited by Maurice Geller, maurice.geller@spglobal.com




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