U.S. oil tanker imports to compensate for Canadian disruption

Tue May 10, 2016 2:53am EDT
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By Keith Wallis

SINGAPORE (Reuters) - Canada's wildfires, which have knocked out some 1.5 million barrels of daily oil production, are expected to drive up tanker imports and freight rates as U.S. consumers seek alternative supplies after a drop in Canadian pipeline supplies.

With most Canadian oil sand crude piped to the United States, importers there will need bigger seaborne imports, mostly into the Gulf of Mexico, adding to existing port congestion.

Although crude stored in North America could be used to overcome some of the disruption, shipping experts expect tanker imports and freight rates to rise.

"To compensate for the shortfall, the U.S. needs to either ramp up other imports, which would be seaborne, or draw down on inventories. The first alternative would be good for tankers now, whilst the second alternative is positive in the longer term," said Trygve Munthe, co-chief executive of Norwegian-based tanker owner DHT Management (DHT.N: Quote).

Average rates this year for a Very Large Crude Carrier (VLCC) carrying 2 million barrels of oil are around $56,000 per day, according to shipping services firm Clarkson (CKN.L: Quote), while average rates for a smaller Suexmax, carrying around 1 million barrels, are around $36,000 per day.

This increased demand, equivalent to around 36 VLCCs if the outage lasted 12 months, according to Norway's Arctic Securities, could offset the negative impact on freight rates from new tanker deliveries.

Around 56 VLCCs are scheduled for delivery this year.


Smoke and flames from the wildfires erupt behind a car on the highway near Fort McMurray, Alberta, Canada, May 7, 2016. REUTERS/Mark Blinch