Bloomberg News

Gasoline Cargoes to U.S. May Rise as Refineries Cut Production

November 02, 2011

Oct. 27 (Bloomberg) -- Gasoline shipments from Europe across the Atlantic Ocean may jump during the next two weeks as U.S. refineries cut production.

Thirty-five tankers were booked or due to be chartered for loading in the two weeks, according to the median estimate in a Bloomberg News survey of six shipbrokers, one owner and two traders yesterday. That’s the highest number since the survey began four months ago, and eight more ships than last week.

U.S. agricultural demand for diesel has spurred refineries to increase production of that fuel, and cut gasoline output, said Ehsan Ul-Haq, a senior consultant at KBC Energy Economics in Walton-on-Thames, England. Reduced gasoline output and more exports to Latin America have increased the need for supplies from Europe, Ul-Haq said.

“There is a lot of harvesting demand for diesel, especially in the U.S. Midwest,” Ul-Haq said by phone today.

Total U.S. diesel production rose 1.3 percent to 3.9 million barrels a day last week, according to the Department of Energy. Gasoline production fell 4 percent to 8.9 million barrels, and inventories decreased 0.7 percent to 204.918 million barrels, the department said. That’s the fourth consecutive decline in stockpiles, the data show.

Growing Demand

Growing Latin American demand for gasoline and diesel has bolstered imports from the U.S., Ul-Haq said. U.S. exports of unleaded gasoline to Brazil came to 3 million barrels this year through August, said Claudiu Covrig, an analyst at Kingsman SA, a Lausanne, Switzerland-based research company. The total for all of last year was 1.8 million, Covrig said, citing Kingsman and U.S. International Trade Commission data.

Increased Latin American gasoline demand has partly reduced the supply of ships that typically return to Europe after discharging cargoes, Ben Goggin, a London-based freight- derivatives broker at SSY Futures Ltd., a unit of the world’s second-biggest shipbroker, said by e-mail today.

“Demand for cargoes in the Caribbean and Latin America has created a shortage of ships in Europe,” Goggin wrote.

Daily rental income for tankers carrying the fuel across the Atlantic Ocean jumped 80 percent yesterday to $10,643, according to the Baltic Exchange in London. That’s the highest return since Oct. 4, data from the exchange show.

Medium-Range Tankers

Of the 35 vessels in the survey, known in the industry as medium-range tankers, 20 have been booked and 15 more will probably be hired, the respondents said. The 35 tankers would be able to carry about 11 million barrels of gasoline, or 786,000 barrels a day over the next two weeks. U.S. imports averaged 817,000 barrels a day over the past year, according to the U.S. Department of Energy.

The survey is based on so-called single-voyage, or spot, charters and excludes loadings under longer-term contracts. It assumes shipments to the U.S. East Coast from northwestern Europe. Each tanker would normally haul about 37,000 tons of cargo, or 315,000 barrels.

Charter rates on the route jumped 19 percent yesterday to 176.25 industry-standard Worldscale points, according to the exchange. The points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates for every voyage, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates. Rates increased the most since Jan. 4, 2010, to the highest level since Sept. 30, bourse data show.

--Editors: Claudia Carpenter, John Deane

To contact the reporter on this story: Rob Sheridan in London at rsheridan6@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net


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