The newly built Very Large Crude Carrier that would have been the fifth VLCC to bring diesel to Europe in the space of a few months is now heading across the Atlantic for a possible break bulk operation in the Bahamas, according to market sources.
The VLCC Tonegawa, heard chartered by Koch to load 280,000 tons of diesel, is expected to arrive in the Caribbean island in 16 days.
The VLCC departed from Asia in July and appears to have loaded via ship-to-ship(STS) transfer in Fujairah at the end of the month.
Earlier in August the ship signaled for Rotterdam while rounding the Cape of Good Hope, but late last week it started to signal for the Bahamas, where market participants expect it would most likely be broken into medium-range (MR) vessels that could then head to South American ports.
Economics of brining the vessel are tricky, sources pointed out, as VLCC has limited discharge options. Typically these types of vessels discharge off to smaller ships via STS operations, which at times might be more expensive than just chartering an MR from the U.S. Gulf Coast, one European source said.
However, a larger ship also makes freight cheaper per ton rate, and South America is a key demand pool at the moment. Brazil, as reported by OPIS, has ramped up its imports of the driving fuel following a fire at its largest plant, the Replan refinery.
Previous diesel VLCC arrivals in Europe have also discharged via STS, OPIS analysis of their operations shows.
Four other large cargoes have arrived in Europe since June: the Xin Hui Yang, the DHT Stallion, the Maran Aphrodite and the New Eminence.
The exact content of the Tonegawa's cargo remained a point of focus and speculation among European market participants earlier in the week, even as it moved farther across the continent.
Market participants in northwest Europe told OPIS that the cargo is believed to have been of German or French winter specification, which will become the main trading product in the European market in a few weeks.
The VLCC's new direction has not coincided with sharp movements in European diesel spot differentials.
Likewise, when the ship started to indicate for Rotterdam earlier in August, the market did not appear to react. The vessel's signaling for the Dutch port coincided with increased expectations of tightening balances for the 10-ppm market in northwest Europe in the last quarter of the year. A transatlantic diversion was also considered a possibility by market sources.
--Paulina Lichwa-Garcia, plichwa-garcia@opisnet.com
--Anthony Lane, alane@opisnet.com
--Edgar Ang, eang@opisnet.com
Copyright, Oil Price Information Service
