Argus Media Limited

10/01/2021 | News release | Distributed by Public on 10/01/2021 10:39

Middle East diesel heading to Latin America

A Trafigura-operated very large crude carrier (VLCC) is set to deliver distillates from the Middle East to Peru as nearly-historically low tanker rates and rising Asian refining capacity continue to spur Latin American importers to look to Asia for fuel.

Steaming due north near the southern tip of the Chilean coast, the 2020-built Hunter Idun is carrying 1.61mn bl of diesel/gasoil that originated in the UAE, Saudi Arabia and Qatar to Peru, according to Vortexa.

This shipment fits into the broader trend of Asian fuel supply reaching South American shores perpetuated by a combination of depressed tanker rates, increasing Asian fuel output, and disruptions to US fuel supply. This year, Brazil has increased its imports of Indian diesel, much of it taken from floating storage inventories off the coast of Togo.

South American importers have received 14.9pc of their refined products from Asian suppliers so far this year, up from 8.2pc last year and 7.2pc in 2019, according to Vortexa.

Refinery expansion in most South American countries has failed to keep pace with rising fuel demand, keeping the region largely dependent on imports, mostly from the US.

Peru receives the majority of its fuel imports via medium range (MR) tankers, with capacities of about 325,000 bl, loading in the US Gulf coast and transiting the Panama Canal. The Hunter Idun would be the first VLCC, with a capacity of about 2mn bl, to deliver fuel to Peru in at least three years, according to Vortexa data.

Tanker rates sitting at or near record lows have aided in the economics of shipping fuel farther distances. Sluggish global oil demand, which remains below pre-pandemic levels, and ample tanker supply have caused rates across most tanker segments to fall to or below breakeven levels this year.

Trafigura chartered the Hunter Idun in July for $17,000/d for the first three months and $30,000/d for the subsequent four months, according to shipbroker reports, compared with short-term VLCC time charter rates exceeding $100,000 b/d in the spring of 2020 during the floating storage boom.

An oversupplied tanker market puts downward pressure on chartering costs for smaller tankers that are used in the loading and unloading of VLCCs, such as the Hunter Idun, holding refined products.

The Hunter Idun is expected to arrive in Callao, Peru, on 5 October.

By Nicholas Watt