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May 27, 2018

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Clean Tankers Commentary

New York (Platts)--07Dec17/0745 pm EST/ 0045 GMT

The East of Suez Long Range I, or LR1 tanker, market was stable Thursday as the existing demand was supporting the rates despite of resistance from charterers, market participants said. A few outstanding cargoes and ships running behind their schedule were working in favor of owners. LR1s Formosa Falcon and King Douglas, which were placed on subjects by Haldia Petrochemicals for loading on the Persian Gulf-Haldia route, were running late at the moment. "This is helping clear ships from the market, which is good for owners," a source with a clean oil tankers' owner said. Among the LR2 fixtures heard, the Van Phong I was placed on subjects by Clearlake at w110 for December 19 naphtha loading in JNPT and New Mangalore for delivery in Japan. This ship was earlier released by Socar after the company was unable to get the requisite volume for loading, sources said. "Both LR1 and LR2 market is stable and moving sideways," a source with a clean oil tankers' owner said. "It seems the uptrend has stopped," a Tokyo-based chartering executive with a global commodities trading company said. Referring to the Van Phong I, he said that it was taken for relatively prompt loading, considering the fact that LR2s were booked even upto three weeks in advance. Furthermore, not all ships are suitable to load cargoes in New Mangalore, sources said. The spread between the LR1s and LR2s on the Persian Gulf-Japan route was almost w25, one of the highest so far this year. At the current discount to the LR1s, charterers may be encouraged to use more LR2s but owners were skeptical about that happening. LR2s are now significantly cheaper than LR1s but owners argue that this may not necessarily result in a shift in demand. Earlier, LR1s were eating into the demand for MRs by loading partial cargoes for Cross-PG voyages. Now, LR1s are busier on the long voyages, dampening the interest of owners for short voyages within the Middle East. MRs are now trading at a premium of nearly 40 Worldscale points to LR1s and over 60 points to LR2s. The cost of moving 75,000 mt and 55,000 mt cargoes on the PG-Japan route is $16.73/mt and $20.53/mt, respectively, according to the S&P Global Platts data. The cost is $26.24/mt for MR tankers.


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Arab Gulf-Japan 55kt


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