US OIL TANKER RATES SOAR | Car Shipping with Cartran.net


Those US tanker owners with a toe in the Jones Act market are counting themselves lucky. In contrast to the international tanker arena, which is overtonnaged and facing several more years of desultory returns, the domestic US tanker trades are booming. US oil production is rising and expected to average 7.3 million barrels per day (bpd) this year, up from a 60-year low of 5 million bpd in 2008. The turnaround stems primarily from the growing output of shale oil at a number of sizeable deposits across the country. Most of the shale oil is light, sweet crude with a low sulphur content.
Thanks to rising shale oil production in the country and the need to transport large volumes from US Gulf marshalling terminals to the country’s refineries, both local and distant, every tank vessel flying a US flag is in great demand. Single-voyage charter rates for 45,000 DWT tankers are touching near record highs of USD 100,000 per day and show no sign of slipping back. The average rate in 2012 was USD 55,000 per day.
Growing shale oil output has served to widen the disparity between the domestic West Texas Intermediate (WTI) crude oil benchmark price and that of Brent crude which pertains internationally. To take commercial advantage of the disparity US East Coast refiners are replacing their overseas crude purchases with shipments from the US Gulf.
Similarly, the refined product output of the US Gulf refineries is more favourably priced than supplies from foreign refineries. For those products in demand on the East Coast, the stocking of regional distribution terminals with cargoes processed in the US Gulf is paying dividends.
Movements of crude and refined products from the US Gulf to East Coast ports did not exist two years ago. They have created a surge of interest in Jones Act tankers and presented an additional challenge to those international tanker owners who traditionally relied on US oil imports for a good deal of their business.
Domestic tanker movements, as is all the country’s US port-to-port commercial traffic, are governed by the Jones Act. Passed in 1920 as the Merchant Marine Act, the legislation confirmed the protectionist measures governing coastal shipping enshrined by the founding fathers at the time of the American Revolution.
The Jones Act requires that all goods transported by water between the country’s ports be carried in US-flag ships constructed in the US, owned by US citizens and crewed by US citizens and permanent residents. From time to time the US Government has granted emergency Jones Act waivers to allow foreign-flag vessels to engage in the domestic trades, as was the case in 2010 following the Deepwater Horizon oil spill and in the aftermath of Hurricane Sandy in 2012. However, such relaxations are rare and short-lived.

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