Analytics Vortexa

At a time when very large crude carriers (VLCCs) are increasingly being touted for crude floating storage in an oversupplied market, newbuild tanker Elandra Denali is bucking the trend by loading jet fuel for her maiden voyage this week. Such a strategy initially seems unorthodox, but in fact underlines global weakness in jet fuel demand in the wake of the coronavirus outbreak, and the severe lack of jet fuel storage especially within South Korea.

 

VLCC to load up jet fuel 

  • VLCC Elandra Denali will load a jet fuel cargo from Daesan, South Korea — likely from the Seosan KNOC Terminal. She was seen anchored near the port as of 30 March, having set sail from South Korea's Ulsan shipyard earlier last week, Vortexa data show.
  • The Vitol-chartered VLCC may be deployed for jet fuel floating storage and/or for delivery to west of Suez markets. The current steep contango in Singapore jet fuel swaps is driving floating storage interest from traders. But there are concerns among market participants that storing aviation fuel offshore can lead to quality degradation over time.

More clean product-laden VLCCs

  • The VLCC's discharge location is yet to be confirmed, but she could make her way around the Cape of Good Hope to eventually discharge in Europe, west Africa and/or the Caribbean. Vortexa recently observed jet fuel cargoes divert away from the Mediterranean, to storage terminals in the Caribbean against the backdrop of weak European jet fuel demand.
  • Vortexa last observed jet fuel load onto a new build VLCC in June 2019. Mirroring the current situation, that cargo was then also loaded from Daesan on the then Vitol-chartered Nissos Despotiko. She later discharged via STS onto several tankers offshore west Africa and the UK.
  • On previous occasions, newbuild VLCCs that have loaded clean products have mostly loaded diesel/gasoil, typically from the largest producers in Asia and the Mideast Gulf, before heading westwards — mostly to Europe or west Africa.
  • The only other VLCC currently sailing with clean products on board is Elandra Kilimanjaro. She was previous declaring Rotterdam, but last week switched declaration to Lome, Togo and is expected to arrive there this week.

Floating storage viability

  • Even after taking into consideration potential degradation concerns, storing jet fuel as floating storage may still be viable as the overall weakness in the jet-kerosene fuel markets is likely to have narrowed the premium that Jet A1 — standard grade for aviation fuel in most countries  — would carry over 'off-spec' kerosene.

 

 

 

 

 

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