A flotilla of European fuel tankers is preparing to sail to the US in the wake of tropical storm Harvey, as oil traders scramble to replace supplies of petrol knocked out by the worst storm to hit Texas in 50 years.
Shipbrokers in London said almost 40 cargoes of petrol had been booked or were being negotiated so far this week, well up on the usual volume, and traders were asking for flexibility to deliver either to the Atlantic seaboard or the Gulf Coast depending on when ports may reopen.
Harvey has knocked out more than a fifth of US oil refining capacity or roughly 4m barrels a day, sparking fears of fuel shortages and driving wholesale petrol prices up by 20 per cent in the past week to the highest level in two years.
US drivers bought record volumes of petrol last week, purchasing 9.85m b/d, according to preliminary estimates from the Energy Information Administration on Wednesday.
“The number of gasoline cargoes getting arranged is rising every hour,” said Richard Matthews at Gibson Shipbrokers in London.
“Everyone’s come into the market to ship gasoline from Europe to the US, particularly the East Coast but also taking options to go to the Gulf.”
Tanker earnings for the transatlantic route, a proxy for demand, have soared almost six-fold in the past week, shipbrokers said, rising to more than $20,000 a day for the benchmark voyage, from $3,500 a week ago.
The total number of shipments could still change because not all voyages are arranged through brokers, and some still being discussed may not be finalised. About 25 have already been fixed or are expected to be in the coming days.
Business impact of Hurricane Harvey Play video Cargoes of jet fuel are also coming from Asia to the US West Coast, while some tankers already at sea have been diverted to regions that may struggle to access fuel supplies from the Gulf.
Harvey, which started as a hurricane and then became a tropical storm, made renewed landfall on Wednesday in eastern Texas and Louisiana, forcing more oil refineries to close. Saudi Arabia-owned Motiva, which operates the largest US refinery in Port Arthur, Texas, said it was shutting down all units at the 603,000 b/d plant due to flooding, joining at least 13 other plants that are either closed or operating at significantly reduced rates.
The benchmark US gasoline contract for delivery into New York Harbor in September jumped more than 5 per cent on Wednesday to $1.90 a gallon, and is up from $1.58 a gallon a week ago. The price rise could, however, be shortlived if refineries are able to return to operations or as additional imports start to arrive.
The October gasoline futures contract was trading around 25 cents lower at $1.66 a gallon. Pipelines that carry fuel from the refining hub on the US Gulf to population centres in the east and midwest have also been shut or forced to run at reduced rates by the unprecedented flooding hitting Houston, risking spreading the impact across the US. The Colonial Pipeline, a key artery supplying the East Coast with more than 2.3m b/d of gasoline and diesel, has been forced to run at reduced rates due to the difficulty in getting supplies from Houston.
The Explorer Pipeline, which runs from Houston to Chicago, has also shut two main lines. US traders looking to import more fuel are, however, facing competition from Latin America.
Countries such as Mexico and Brazil have become major buyers of US petrol exports in recent years, and with less supplies likely to be available from the US in the coming weeks they are looking elsewhere.
Shipbrokers said many of the traders booking European tankers to ship petrol to the US also had added options allowing them to change course mid-Atlantic.
“There’s been a substantial increase in inquiries both for cargoes to go the US but also Latin America,” said one London-based shipbroker.
“Some of the tankers being arranged for the US are also getting an option to go to Latin America.”
Three petrol tankers that were already en route to New York Harbor this week appear to have changed course in recent days. The Gan-Tribute, Lake Sturgeon and Scfanadyr vessels have all steered south-west in the past 48 hours, according to satellite tanker tracking data.
European motorists may also face higher costs with benchmark petrol prices rising as more fuel goes to the US, while supplies of diesel — which the US is a big exporter of to the continent — are expected to tighten.
Source : FT