Clean tankers are enjoying a strong run at year's end thanks to a big uptick in gasoline exports to Mexico. But it remains unclear whether the strength will last as more available ships position in the US Gulf.

The US Energy Information Administration (EIA) reported gasoline exports averaging 1.149 million barrels for the week ending 23 December. That is the highest level of exports for US gasoline exports recorded by the EIA.

The rise in exports has translated in better earnings for clean tankers. The Baltic Exchange's benchmark rate for medium-range (MR) tankers in the Atlantic Basin trianglulation reached $21,635 per day as of 23 December.

MJLF research analyst Court Smith says Mexico is becoming a major destination for US gasoline thanks to a liberalisation scheme set in motion this year that, for the first time, allows fuel distributors to buy gasoline from sources other than the country's state oil monopoly Pemex.

That has tightened ship supply in the US Gulf, Smith says. The ship supply has been further tightened as fog on the Houston Ship Channel and port closures in Mexico have created uncertain itineraries for tankers.

"Mexico has been importing a lot more gasoline," Smith said. "There has been a definite uptick in rates, which are also impacted by weather delays."

Mexico's gasoline prices to rise

Whether Mexico's gasoline demand remains strong is unclear. Smith says there was initially a weaker outlook for US gasoline cargoes as peso lost 13% of its value relative to the dollar in the wake of the US presidential election. But cargo activity continued unabated.

The real test will be next month as Mexico's government announced a 14% increase in retail gasoline prices, which is the result of both higher crude oil and the weaker peso.

"There could be some demand destruction there," Smith said. "Price hikes could generate all sorts of outrage."

For now at least, owners appear to be betting on more cargo activity into the country. Smith says the number of open ships in the US Gulf jumped from 48 just before Christmas to 68 this week as owners sought to capitalise on strong MR rates.

"The week is ending on a strong note," Smith said. "But the market will be looking for direction at the start of next week.".