More North Asian gasoil cargoes have reportedly been fixed recently to
move across to Europe with many ships from South Korea pointed toward the
region, according to shipping fixtures obtained by Platts.
Initial volumes of about 400,000 mt have been fixed for voyage for July
with the majority of it comprising 10 ppm sulfur gasoil, trading sources said.
Although the arbitrage to Europe is only marginally open, traders said
North Asian ships have been fixed to make the voyage across to Europe on the
back of better demand from the West.
Brazilian oil giant Petrobas was one of the latest to be heard chartering
a vessel to move 80,000 mt of gasoil from South Korea to the UK at $2.1
million for mid-July.
Also seen for early July was the Ruby Express, a Reliance-chartered
vessel, at a rate of $2.1 million to carry 90,000 mt of gasoil from the west
coast of India to the UK.
Barrels of gasoil were also heard to be moving from Taiwan to the UKC,
which is an indicator of the arbitrage being open, said a Singapore-based
trader.
"Taiwan barrels only go to the West if the arbitrage is open, or else the
majority ends up in Singapore," he said.
The arrival of Asian gasoil cargoes into Europe comes on the back of
tight supply for 0.1% gasoil from a strong Mediterranean market pull, drawing
product away from traditional resupply locations in the Baltic sea.
Tender-driven demand has strengthened the Mediterranean gasoil market as
Turkey, Syria and Egypt all look for material to cover typical high season
summer demand.
However, traders in Asia were unsure how long the arbitrage window would
stay open, after European prices weakened slightly Tuesday.
At 0830 GMT Tuesday, the 10 ppm sulfur gasoil loading out of South Korea
was heard trading at around $90.48/barrel. In comparison, the 10 ppm sulfur
gasoil loading out of Northwest Europe was assessed at $689.50/mt, which works
out to about $92.55/b.
On Monday, the NWE gasoil prices for the ultra-low sulfur diesel was at
the highest since early May at $697.25/mt, or $93.59/b.
While freight from South Korea to UKC works out to about $3.10/b,
depending on the freight market, rates for a newly built LR 2 vessel can be
just 70% of the standard rate, a trading source had said earlier.
"With the 10ppm looking weaker in Europe, I think the 10 ppm prices into
the 0.1% pool weakening structure is enough to make floating storage work,"
said one trader on the possibility of cargoes being moved to storage instead
if the arbitrage economics weaken further.
Meanwhile, a trader based in the Mediterranean said although demand is
good in the region, economics do not work for gasoil from Asia to be sent
there. "If you arrive on a 100,000 mt ship at plus $9/mt [in the
Mediterranean], the STS [ship-to-ship] will cost you $10/mt," he said
referring to the additional costs of taking oil from the larger tankers plying
the arbitrage routes and unloading into the smaller 25,000-30,000 mt cargo
sizes that are more usual in Mediterranean trade. "So better to go north," he
said, referring to the savings on the STS cost.
With demand expected to taper off from India for the low sulfur gasoil
due to the monsoon season, all eyes are on the market in the West to support
premiums for the low sulfur gasoil, said traders.
move across to Europe with many ships from South Korea pointed toward the
region, according to shipping fixtures obtained by Platts.
Initial volumes of about 400,000 mt have been fixed for voyage for July
with the majority of it comprising 10 ppm sulfur gasoil, trading sources said.
Although the arbitrage to Europe is only marginally open, traders said
North Asian ships have been fixed to make the voyage across to Europe on the
back of better demand from the West.
Brazilian oil giant Petrobas was one of the latest to be heard chartering
a vessel to move 80,000 mt of gasoil from South Korea to the UK at $2.1
million for mid-July.
Also seen for early July was the Ruby Express, a Reliance-chartered
vessel, at a rate of $2.1 million to carry 90,000 mt of gasoil from the west
coast of India to the UK.
Barrels of gasoil were also heard to be moving from Taiwan to the UKC,
which is an indicator of the arbitrage being open, said a Singapore-based
trader.
"Taiwan barrels only go to the West if the arbitrage is open, or else the
majority ends up in Singapore," he said.
The arrival of Asian gasoil cargoes into Europe comes on the back of
tight supply for 0.1% gasoil from a strong Mediterranean market pull, drawing
product away from traditional resupply locations in the Baltic sea.
Tender-driven demand has strengthened the Mediterranean gasoil market as
Turkey, Syria and Egypt all look for material to cover typical high season
summer demand.
However, traders in Asia were unsure how long the arbitrage window would
stay open, after European prices weakened slightly Tuesday.
At 0830 GMT Tuesday, the 10 ppm sulfur gasoil loading out of South Korea
was heard trading at around $90.48/barrel. In comparison, the 10 ppm sulfur
gasoil loading out of Northwest Europe was assessed at $689.50/mt, which works
out to about $92.55/b.
On Monday, the NWE gasoil prices for the ultra-low sulfur diesel was at
the highest since early May at $697.25/mt, or $93.59/b.
While freight from South Korea to UKC works out to about $3.10/b,
depending on the freight market, rates for a newly built LR 2 vessel can be
just 70% of the standard rate, a trading source had said earlier.
"With the 10ppm looking weaker in Europe, I think the 10 ppm prices into
the 0.1% pool weakening structure is enough to make floating storage work,"
said one trader on the possibility of cargoes being moved to storage instead
if the arbitrage economics weaken further.
Meanwhile, a trader based in the Mediterranean said although demand is
good in the region, economics do not work for gasoil from Asia to be sent
there. "If you arrive on a 100,000 mt ship at plus $9/mt [in the
Mediterranean], the STS [ship-to-ship] will cost you $10/mt," he said
referring to the additional costs of taking oil from the larger tankers plying
the arbitrage routes and unloading into the smaller 25,000-30,000 mt cargo
sizes that are more usual in Mediterranean trade. "So better to go north," he
said, referring to the savings on the STS cost.
With demand expected to taper off from India for the low sulfur gasoil
due to the monsoon season, all eyes are on the market in the West to support
premiums for the low sulfur gasoil, said traders.
