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USGC destocking before 2018 sees flurry of clean product cargoes head to WAF

Several cargoes of clean products aboard medium-range vessels have set sail from the US Gulf Coast bound for the West African offshore markets as product holders in the US look to minimize inventories for tax purposes at year-end.

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Five cargoes loading in USGC ports left in December, among these the High Prosperity, a 48,711 dwt vessel, which loaded Thursday at Lake Charles, Louisiana, heading for the offshore Lagos market, and likely to be carrying gasoline.

In November, only one cargo left the USGC for West Africa, leaving Pascagoula, Lousiana, for Tema, Ghana, compared with five loaders seen so far in December, according to S&P Global Platts trade flow software cFlow.

US companies use LIFO, or "last in, first out" to value inventories based on the price of the newest inventory.



This tax policy can sometimes encourage companies to minimize stocks by the end of the year, especially in the case of higher outright prices, which partly explains the above-average flow of vessels to West Africa.

Demand for gasoline in the offshore West African markets has also been particularly strong in the past three weeks, with Nigeria hit by gasoline shortages across the country.

As part of Nigeria's Direct Sale Direct Purchase (DSDP) model, gasoline suppliers were heard to be bringing fewer volumes from Northwest Europe than usual given issues around pricing, market sources said.

"We don't think that the shortage situation in Nigeria will be solved soon as supply will be OK in Lagos...but the rest of the country will continue to suffer from shortages," a trader said, adding that not enough gasoline was being imported to cover domestic demand.

Most vessels leaving Europe for West Africa have been placed before they arrive in the region, he said. "The economics [to import gasoline] are so poor that most cargoes going to WAF have already been committed," he said.

Vessels loading from USGC to West Africa in December: cFlow data


--Ahila Karan, ahila.karan@spglobal.com
--Virginie Malicier, virginie.malicier@spglobal.com
--Edited by Jonathan Fox, jonathan.fox@spglobal.com