USGC to Caribbean clean freight hits 2022 high amid strong oil demand

Clean freight rate loading on the US Gulf Coast to the Caribbean reached the highest level in 2022 Feb. 25, as traders rushed to fill a high-demand spot market after waiting out a tricky month roll that favored short-haul trips to ballast ships back to the Gulf Coast quickly for fresh cargo.

Freight rates loading on the USGC en route to the Caribbean for Medium Range tankers rose $75,000 Feb. 25 to a lump sum of $800,000, up roughly 22% from the start of 2022.

At least 10 product cargoes were fixed throughout the week from the Gulf Coast to the Caribbean: The Aquasmeralda for Trafigura, Velebit and Eurosailor for Marathon, Essie C for Valero, Agioi Fanendes for Chevron, Stena Impulse for ST, and Alpine Link and another ship to be nominated for Exxon, sources told S&P Global Platts. The Bastille Street and UACC Ras Laffan were also fixed, with the charter not reported.

Twelve other fixtures were heard through the week to other parts of Latin America, from Chile to Brazil and to Eastern Mexico. Sources said cargo volume to the Caribbean was higher than normal, as shipowners were interested in keeping the ships close to the USGC to price in rising bunker rates.

"Bunkers are moving higher, folks are looking for longer haul runs right now, so they are going to have to price in an incentive," said a shipowner, emphasizing the need for quick trips to ballast tankers back to the USGC.

A Latin America products trader said that the availability of ships coincided with a changing market structure and high demand from countries, such as Jamaica and Colombia, which usually exports diesel but had to import due to refinery issues.

"The issue here was the massive backwardation in the market. We all waited until end-February ... to load cargoes," he said. "All the Caribbean is dry. We all had positions trying to clean inventories and avoid the roll, so everyone and their aunt was loading cargoes. Besides, Colombia brought more in for March due to refinery issues."

He said market demand could significantly ease by mid-March.

Tonnage was noticeably tight for mid-February dates for prompt Medium Range tankers, with roughly three to five ships available Feb. 17 for immediate load out of the US Gulf Coast. More availability picked up later, with nine to 11 ships available to load in the prompt window for Feb. 22.

The Latin America product market was shifting from the tender process to the fixing process. Traders said during the week that tender markets finally hit a lull, with global tensions adding to reduced seasonal demand, the passing of a major wave of tenders, and rising prices for cost-sensitive consumers in the region.

"Gasoline and LPG prices will definitely go up in all of the countries that need to import crude oil and/or products," a market source said.