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Chemicals
There seems to be some relief on the horizon for the tight chemical market. We see tanks coming online again which were used for spot operations during the period with the lower Rhine levels. There is also going to be a structural change from 2019 onwards. Almost all chemical terminals are currently expanding or have the plans to expand as from 2020/2021. Add the new MOL/ Seatank project to that and it’s hard to imagine that we’ll see a similar tight picture as this year. We also see terminals aiming for a specific product and/or chemical group to specialize and to stand out compared to their competitors. What the effect on storage rates will be is hard to tell but that the terminals cannot sit and wait is an understatement. Feedback from the chemicals producers is that most important for them is the focus on service, timing and to build a long-lasting relationship with the chosen terminal.
Coming back to the here and now, finding heated tanks on spot basis remains a challenge, not only in ARA tanks but in Central and Southern Europe we experience the same. Tanks can only be offered as from Q1/Q2 2019 onwards and even then, there is a limitation concerning the maximum capacity a tank operator can make available for a specific product. Longer lead times and contract periods are required to convince a terminal to store your product.
Crude
Brent finally broke 80 USD and never looked back. OPEC is reluctant or incapable to produce more oil while supplies from Venezuela and notably Iran are falling rapidly. WTI is rising too but not as fast as Brent, a reflection of tightening supply in the Middle East while U.S. shale production is close to record highs and pipeline bottlenecks are preventing the oil to be exported. Hedge funds are betting on higher prices as well, expecting more export cuts in Iran, exacerbating the move up.
To find crude capacity in Europe remains a challenge, especially closer to the refinery cluster as the major players are holding on to their market share. In second tier locations we see some availability against fairly competitive rates. We also see a shift in behavior from dedicated terminals; they now seem more open to commercial third party proposals. For crude operators this is quite rare, but it is interesting to see whether a fully independent crude terminal could be more common in the future.
It remains to be seen what kind of impact the US sanctions will have on the Iranian crude oil export. The European Union is looking to create a Special Purpose Vehicle (SPV) where it would still be possible to trade with Iran bypassing the US sanctions. Iran would import products out of the European Union and will export and store crude in the EU. This could be an opportunity for storage operators.
Gasoil
Gasoil spreads are cooling off again. The front is in a small contango while further out the backwardated market is slowly cooling off as well. The market is cautiously showing interest for storage for gasoil products again. Not for big volume, but for smaller tanks. Prices are still at the low end of the range and availabilities are ample.
Gasoline
Spreads are coming off again after the spec change and volumes to the AG are decreasing again after a flurry of exports on the back of outages. The arb to the US is closed so this could indicate that Europe will have plenty of material soon. Whether this will last long remains the question. Refinery utilization is roughly 90% but refinery margins are decreasing rapidly so we might see early maintenance and/or lower runs in the coming months to correct the imbalance. Cargo owners are sniffing around for storage but econs do not work just yet. Players with storage are staying put. Most cargo owners with specific storage requests prefer somewhat smaller tanks.
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