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New Turkish Straits rules to shake up shipping, oil markets this winter

London — New shipping regulations in the Turkish Straits have increased delays in the region for vessels longer than 250 m and could be a headache this winter for the large tanker market as delays and demurrage build, sources said.

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"Winter with the bad weather is a nightmare going through the Straits and costly due to waiting time," a fuel oil source said.

Weather in the Mediterranean and Black Sea deteriorates in the winter, so freight rates are often higher in November and December.

New regulations were implemented in the Turkish Straits on September 1, requiring tankers over 250 m in overall length to have compulsory pilotage and a tug escort in the Dardanelles. The same applies to tankers over 200 m in the Bosporus.

In response to the new regulations, the Worldscale Association amended rates for voyages involving the transit of the Bosporus Strait, adding 16 cents/mt to all rates involving the strait from September.

Delays of longer than 12 hours are typically paid by the charterer. Therefore the new regulations will add hefty demurrage charges to voyage costs. LPG tankers over 150 m, oil tankers over 200 m and dry bulk vessels over 250 m are all restricted to day-light crossing of the Turkish Straits, and with daylight hours growing shorter as winter draws in there is less time for them to cross the straits, according to shipping agents.

The Bosporus and the Dardanelles to the south together form the Turkish Straits, the only commercially navigable transit route between the Black Sea and the Mediterranean.

The Black Sea is a leading region for loading oil products including Russian fuel oil, gasoline and naphtha and some market players expect cargo loadings on Aframaxes and Suezmaxes from the Black Sea could fall to avoid the potential issues, although flows have not yet been affected.

In the clean market, gasoline cargoes have continued to move east as traders are utilizing the East/West, the differential between Asian grade 92 RON/EBOB, arbitrage opportunity, with Q4 18 and Q4 19 Asian demand historically strong.

"The rates could affect gasoline, as some product is moving through the Black Sea, only on the Long Range tankers going east," one gasoline trader said.

The regulations are also likely to affect flows of naphtha, which load on LRs in Black Sea ports including Tuapse and Novorossiisk, typically bound for the Asian petrochemical market. Traders are relying on the arbitrage from the region to Asia to cut back an overhang of product in Europe, which could be stymied by delays moving through the strait.

On the dirty side, Russian fuel oil, including highly viscous M100, loads from Black Sea ports including Taman and STS Kavkaz and these cargoes are then shipped east to the Singapore bunker market. Fuel oil is also shipped in the summer months from the Black Sea to Saudi Arabia to meet additional air-conditioning demand.

Looking at the bunkers market, delays for vessels passing through the straits can cause significant disruption to barge schedules at Istanbul. When there have previously been heavy delays passing through the straits due to heavy fog, bunker prices at the Turkish port have risen.

Physical suppliers at Istanbul have said that while vessels passing through the strait may be delayed due to bad weather or a lack of tugs available following on from the new regulation, they do not foresee any significant issues with their operations, schedules or demand levels.

--Staff Reports, newsdesk@spglobal.com

--Edited by Jonathan Loades-Carter, jonathan.carter@spglobal.com