(Bloomberg) – Slumping oil prices are spurring 6,400 kilometer diversions of tankers filled with diesel and jet fuel as the price of ship fuel plunges, opening up trading opportunities. At least five tankers will deliver refined products to European ports in August and September, sailing around SA rather than using the normal shortcut through Egypt’s Suez Canal. The falling cost of fuel oil, used to power ships, has made longer voyages viable at a time when there are advantages for traders to keep cargoes at sea.
“There’s massive demand to move oil products over very long distances,” Erik Nikolai Stavseth, a shipping analyst at Arctic Securities ASA in Oslo, said in late August. “These shipments tell me that there are very good times ahead for product-tanker owners,” he said, referring to ships that carry refined fuels like gasoline and diesel.
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Rates for hauling these fuels are surging. The sort of long-range tankers being used to sail around Africa will earn $28,375 a day this year, according to a survey of shipping specialists compiled by Bloomberg. That’s the most since at least 2010.
The journey around Africa only works occasionally, when fuel prices are low and trading conditions are right. The normal route remains through the Suez Canal, which is what most vessels still do.
Each long-range tanker is designed to deliver about 80,000 metric tons of cargo. Extended journeys help owners because they keep ships employed for longer, effectively cutting fleet supply. As well as lower fuel prices, traders also like the option of selling cargoes en route, to West Africa, for example, where demand is rising, and to other regions including Latin America.
The trend to sail around Africa could intensify if the price slides to new lows, reducing fuel costs further and as more export refineries come on stream.
