Medium-range (MR) tanker rates on the Atlantic triangulation came off recent highs as shipowners wait on definitive word about the status of an outage on a major US gasoline pipeline.
MR rates surged after a fire erupted on a segment of the Colonial Pipeline, which carries a total of 2.5 million barrels (357,000 tonnes) per day of clean petroleum products up to the East Coast from US Gulf Coast refineries.
With the prospect of more arbitrage trade, MR rates surged Tuesday to about $21,000 per day on the triangulation trade, according to the Baltic Exchange's assessment. The assessment eased to $17,340 per day on Thursday.
Ardmore Shipping chief executive Anthony Gurnee said the surge came amid charterers putting ships on subjects in the immediate wake of the pipeline incident in preparation for any arbitrage trade.
"There's difference between what somebody puts on subjects and what you actually get done," Gurnee told analysts on the company's earnings conference call. "Obviously, if it settled in with those kinds of rates, that would be fantastic. We actually don't expect that. We think it will drift down again."
MJLF analyst Court Smith said most MRs in the Atlantic Basin still remain on subjects with few confirmed charters. Owners do not appear as yet to be ballasting over more supply into the Atlantic Basin until the length of the outage is made clearer.
The Colonial Pipeline said that it is removing product from the fire-torn portion of the pipeline, with plans to excavate it and install a new segment. A parallel pipeline that carries mostly diesel and heating oil was unaffected by the fire and remains in service.
Smith says the second line will likely have split service to carry gasoline, along with distillates, in order to relieve any supply crunch in the US Northeast.
