Oil companies have rushed to charter large product tankers for transporting European naphtha to East Asia since Wednesday with the opening of an arbitrage window, according to industry data and sources.
Data from Kpler indicates that at least two LR1s and three LR2s have been fixed to lift naphtha from the Mediterranean and Black seas by the end of this month for the long-haul shipments.
Of them, Cosco Shipping Energy Transportation’s 110,000-dwt Rong Lin Wan (built 2017) was taken by BP for a voyage from the Russian port of Tuapse to Japan at a lump-sum rate of $1.75m.
SK Energy booked Reederei Nord’s 114,000-dwt Norddolphin (built 2017) for a shipment from Novorossiysk to Japan at the same rate.
TradeWinds has approached the ship operators and charterers for comments.
The arbitrage opportunities have emerged as the European naphtha market weakens in line with gasoline, price reporting agency Argus Media said.
As the Colonial Pipeline has resumed operations following a five-day outage earlier this month, the US Atlantic coasts have lower requirements of overseas gasoline.
Crackers return
Meanwhile, naphtha demand in Asia is expected to pick up later this quarter with firm petrochemical margins and some crackers returning from maintenance.
Freight rates have remained in the doldrums despite increasing demand from charterers for the long-haul shipments.
The Baltic Exchange assessed the daily rate for shipping refined products from the Mediterranean to East Asia on an LR2 at -$6,694 on Thursday, close to its multi-year low.
The market is awash with tonnage, so more vessels need to be fixed before rates can begin to increase, said a ship operator.
“There are certainly a few more queries [for arbitrage trade], but they are nowhere near enough to get rates moving,” the operator added.
Looking forward, some experts expect MR demand in north-west Europe to be supported as the US may soon begin another round of gasoline restocking.
Following the pipeline shutdown, the US Energy Information Administration estimated gasoline inventories on the Atlantic coast at 60m barrels on 14 May, the lowest in seven months.
“North America will remain a hotspot for clean product trade throughout the summer driving season,” researchers at data firm Vortexa said.
