WEEKLY ENERGY RECAP: Rocketing tanker rates lead to surprise surge in US crude inventories

In this June 13, 2019 file photo, an oil tanker is on fire in the Sea of Oman. Rising tanker rates has contributed to lower US crude oil exports and surging inventories in the country for the fifth consecutive week. (AP Photo/ISNA, File)
Updated 19 October 2019

WEEKLY ENERGY RECAP: Rocketing tanker rates lead to surprise surge in US crude inventories

Brent crude trended lower to $59.42 per barrel, while WTI also retreated to $53.78 per barrel.

Weak economic data from China added to concerns about the US-Chinese trade relationship.

However, the big news of the week came from the shipping sector as tanker rates rocketed which contributed to lower US crude oil exports and surging inventories in the country for the fifth consecutive week.

The US Energy Information Administration (EIA) reported a 9.3 million barrel gain in US crude inventories for the week ended Oct. 11, which was much higher than the market expected.

Even with heavy discounts applied to US shipments, producers struggled to sell their oil because of rising tanker charter costs.

Rates for chartering a supertanker from the US Gulf Coast to Singapore were reported to have hit record highs of more than $17 million and a record $22 million to China.

This trend is also likely to be reflected in US export data for October. Adding to shipping pressures is the fact that some ships are being taken out of service to fit sulfur-reducing scrubbers ahead of the International Maritime Organization (IMO) environmental rules that are set to take effect in January 2020.

It is noteworthy that US producers export most of their oil on a cost and freight (CFR) basis where the seller is required to arrange for the carriage of oil to the final destination port. 

The expected drop in US crude oil exports as a result of spiking tanker rates shows a serious financial fragility in the US crude oil export system.

Although shipping rates for very large crude carriers hit refinery margins, saddling additional premium shipping cost on the refiners, the physical market for oil strengthened further, and trading in Arabian Gulf sour crude grades continued to pick up.

Now the US will be hoping that higher tanker rates will reduce demand for very large crude carriers, which could ease tanker rates. 

However, until then, US shale producers will likely pay more to have their oil shipped to longer-haul destinations such as the Asian market.


Algeria to cap wheat imports in bid to save foreign currency

Updated 21 November 2019

Algeria to cap wheat imports in bid to save foreign currency

  • Algeria is one of the world’s biggest buyers of the commodity
TUNIS: Algeria has decided to cap soft wheat imports at 4 million tons a year, instead of 6.2 million tons, the government said in a statement.

The decision aims to “preserve foreign currency and reduce Algerian imports of cereals, especially soft wheat,” it said in the statement late on Wednesday.

The government has also set the actual needs of the domestic market for soft wheat at 4 million tons instead of 6.2 tons imported each year, it added.

Algeria is one of the world’s biggest buyers of the commodity. However, hit by lower oil prices since 2014, it is trying to reduce its imports.