A few European oil refineries tabbed to reopen by Barry Rogliano Salles (BRS) would boost suezmax and aframax tankers as VLCCs continue to sink.
The French shipbroker said in its weekly note that the return of Total’s Donges refinery, as well as two other potential facilies in the Amsterdam-Rotterdam-Antwerp (ARA) region, would boost the continent’s refining capacity as buyers turn away from Russian crude barrels.
That would also help trades served by suezmaxes and aframaxes, which together carry 93% of crude oil to Europe.
“This hypothesis is based on the fact that Europe imports most of its crude on these smaller tankers rather than VLCCs,” BRS said, noting VLCCs carry just 3%.
Russia's invasion of Ukraine has redrawn the tanker trades map as western buyers shun Russian oil and China and India take advantage of its discounted price. The moves have boosted suezmaxes and aframaxes while VLCCs have struggled.
Suezmaxes and aframaxes saw their time charter equivalent rates shoot up to multi-year highs, with suezmaxes hitting $109,500 per day and aframaxes $90,537 per day on 12 April, according to the Baltic Exchange.
Since then, both figures have fallen back to earth, with suezmaxes standing at $19,876 per day on Tuesday and aframaxes earning $28,054 per day, but remain well above rates for VLCCs, which have not been assessed above zero since January 2021.
On Tuesday, the Baltic Exchange’s estimate for VLCC TCE earnings -$22,227 per day after hitting all-time lows in March.
“In our view, the main potential driver behind a return to VLCCs shipping crude to Europe would be if rates for suezmaxes soared to such levels that it would make hiring VLCCs more economic,” BRS said.
The Donges refinery is on France's west coast, approximately 40 km from Nantes.
Citing AXSMarine data, BRS said prior to its 2020 shutting, it would source crude from Norway, Angola, Azerbaijan, Libya, Algeria and the US on suezmaxes and aframaxes with the occasional VLCC carrying cargo from the Middle East.
Since its restart earlier this month, it has taken deliveries from US, Iraq and Norway.
BRS did say it was unlikely all of the 810,000 barrels per day of European refining capacity would come back online as some were converted into import terminals or switched to producing biofuels.
The brker said it understood the two refineries in the ARA area could restart in the coming months.
They would boost refining capacity by 185,000 barrels per day. Donges has a capacity of 220,000 barrels per day.
