The Atlantic product tanker market is riding high after the largest fuel pipeline in the US was shut due to a cyberattack.
Operations at the 2.5m-barrel-per-day Colonial Pipeline have been nearly all suspended following a ransomware attack on Friday.
Analysts said the incident would boost demand for product tankers, with US oil companies busy sourcing barrels ahead of the summer driving season.
“If the pipeline reopens Monday or Tuesday, the market impact will be relatively short lived,” Gibson Shipbrokers research head Richard Matthews said.
“However, if the pipeline is slow to restart, then the product tanker market could be set for a bullish few week.”
The 8,851-km pipeline transports gasoline and distillates from refineries on the US Gulf Coast to locations near the Atlantic coast.
Its outage can often trigger more seaborne shipments into the areas experiencing shortfalls, either on MRs from northwest Europe or Jones Act tankers from the Gulf.
Occasionally, product tankers can find more employment opportunities in the Gulf if the oil firms there need to export excess barrels.
“In our view this is likely to be a short-lived event, but obviously the longer the disruption to the mainlines, the bigger the impact will be on products tankers,” Clarksons Platou Securities said.
US east coast has imported large quantities of refined products from Europe in recent weeks, with gasoline demand expected to pick up due to summer holidays amid mass vaccination.
Government data showed gasoline stocks in the region stood at 64.6m barrels as of 30 April, the highest since end-February.
Strong market
Following the cyberattack, product tanker equities have been traded up on Monday, with Hafnia gaining 6.8% to €1.85 ($2.25) and Torm surging by 6.58% to DKK 60.8 ($9.93).
In the forward freight agreement market, the May contract for the Atlantic MR basket rate jumped by $5,573 to $14,671 per day, according to the Baltic Exchange.
Brokers reported increased enquiry to take vessels on short time charter over the weekend as shipowners began to hike freight rates in the Atlantic basin.
Rates on the northwest Europe-US Atlantic coast route rose by 35 Worldscale points to WS 165 on Monday, while those on the US Gulf-northwest Europe trade gained 49.5 points to WS 140, Howe Robinson Partners estimated.
Citing Refinitiv Eikon data, Reuters reported at least six tankers were tentatively booked to transport European gasoline to the US to cover the shortfalls.
But it is not certain all the fixtures will be materialised. The Colonial Pipeline operator has announced its service will be “substantially” restored by the end of this week.
The US Department of Transportation has issued an emergency order to lifted various limits on fuel transport by road but stopped short of waiving the Jones Act requirement.
“The US Government could waive the Jones Act, increasing US Gulf–US Atlantic Coast trade and supporting demand for non-Jones Act tonnage,” Matthews said.
