Trading firm Trafigura says global stockpiles of diesel and other refined products will remain high into 2017.
The outlook suggests refineries will continue to see poor margins and there will be limited trading opportunities for clean petroleum products in the coming year, prolonging a trend that shipowners have blamed for lower products tanker charter rates.
Ardmore Shipping chief executive Anthony Gurnee noted on the company's last earnings conference call that the charter market is "experiencing softness in particular as a consequence of lower oil trading activity and global inventory de-stocking in tandem with reduced refinery throughput."
The Baltic Exchange's index of clean tanker rates across several routes last closed at the 500, the lowest since November 2009.
China to add to diesel oversupply
In its annual report, Trafigura said China's big refineries will be able to produce a low-sulphur diesel by the start of next year. That standard will allow it to compete in a wider array of export markets and potentially displace low-sulphur diesel from the US or India's new export-oriented refineries.
"The result of the change, together with a dip in manufacturing demand in China, has been to create an exportable surplus of diesel which added to global over-supply," Trafigura said.
Likewise, naphtha cargoes from Europe and the US face increasing challenges, Trafigura says. Asia's petrochemical customers are using other feedstocks and more supply is available from local and short-haul sources such as the Middle East. Trafigura says the naphtha trade may become more regional with its use in gasoline blending the primary driver of demand.
"With the east absorbing significantly lower volumes, western markets were long, but rising western consumption of gasoline drove increased use of naphtha as a blending component that helped to absorb the surplus," Trafigura said.
