The Baltic Exchange's assessment on freight rates for trans-Atlantic clean tankers saw a 160% jump on news of an explosion of a major US gasoline and gasoil pipeline. But brokers caution that the spike may be short lived if the pipeline resumes operations quickly.
The medium-range (MR) tanker rate spiked hit $19,333 per day, up from $7,586 per day on Monday and the highest since early March. The jump occurred on news of a fire hitting the Colonial Pipeline, a 5,500-mile (8,900 kilometre) pipeline that brings gasoline, diesel and distillate from the Gulf Coast to the US Northeast markets.
Earlier in the day, TradeWinds reported that MR rates were indicated to be reaching $15,000 per day in the immediate wake of the incident.
The pipeline saw an outage in September which caused a halt to diesel shipments to the US Northeast. That caused the Baltic's rate assessment for the Gulf Coast-to-Europe backhaul to briefly move above the rate for the fronthaul UK-to-Atlantic Coast as charterers sought to ship out diesel cargoes that were backing up in the US Gulf.
The outage on the pipeline comes as the US home heating season kicks in, requiring more shipments of distillate to the US Northeast, tanker brokerage MJLF says. The seriousness of the explosion, which left one person dead, and the likely need for an investigation may prompt more clean petroleum product cargoes into the US Northeast, MJLF adds.
"This Colonial outage is expected to be longer than the first, and as such should have more of an impact on the oil supply chain beyond the immediate demand for clean product imports," MJLF said. "If the outage goes on for a while we can expect to see positive pressure on MR time-charter rates as well."
'Speculative fixing'
One broker who spoke on background says the rate spike was driven by charterers concerned over ship supply in the immediate wake of the pipeline explosion. Rates could fall if the pipeline resumes operations quickly. Indeed, Colonial Pipeline said the line could be up and running by Saturday.
"The impression that I get is that a fair amount of speculative fixing was done today given uncertainty in how long the pipeline will be out of service," the broker said. "Expectations seem to be that only the most prompt fixtures will be confirmed if the pipeline is indeed fully online by this weekend."
