Flurry of trans-Atlantic Aframax crude trades defy summer lull

Houston — A flurry of deals for 70,000 mt Aframax crude cargoes sailing from the US Gulf Coast to the UK Continent and the Mediterranean, as European countries try to reopen after coronavirus pandemic-induced lockdowns, led to an early end to the typical summer lull in Americas Aframax markets over the past couple of days.

"European demand for barrels is high as they are the only countries/places that have opened up" from pandemic-related lockdowns, a shipbroker said, adding that an increase in US crude production led to excess barrels, which are being sent to the UKC and Mediterranean.

"People are reaching out [for forward dates] because they are predicting a shortage of tonnage willing/available to [take trans-Atlantic voyages] and are guarding against the ultimate increase in rates that would create," he said, as a group of charterers were seen booking Aframaxes with laycan dates beyond the typical loading window.

Americas dirty Aframax markets saw a total of seven cargo deals carried out on the 70,000 mt USGC-Transatlantic run with Aug. 14-20 laycans on Aug. 3 , and a total of six ships were placed on subjects for that route across Aug. 3 and Aug. 4, after freight on the route was rangebound at Worldscale 75 for over two weeks starting July 17.

An advantageous arbitrage, greater demand for crude in Europe and expectations of higher freight rates were seen by sources as motives for the ramping up of inquiries.

The crude arbitrage from the USGC to Northwest Europe has been marginally open since July 29, according to the Platts Analytics Crude arbFlow report, with incentives indicated at $1.29/b for Eagle Ford and 39 cents/b for WTI MEH on Aug. 3.

Ample tonnage

On the other side of the Atlantic, an increase in cargo activity in the third decade of August saw freight rates tick higher since the end of July. However, more tonnage was already expected to be coming into the region, not only from the US Gulf, but also the Mediterranean, given the bearishness of the Mediterranean basin.

"Yesterday there were about five to six ships [available on a spot basis] in the Continent [market], so a bit tight, but it might be balanced by the ships arriving in the region," a broker said. "For the moment ,there are arbitrage opportunities for fuel oil, but whether the market holds depends on how many cargoes will be pushed in the market in late August-September."

Currently, a total of 21 Aframaxes, including 10 ballasters and 11 laden ships, are making their way to the USGC across the Atlantic, scheduled to arrive between Aug. 4-17.