The tanker market could keep receiving short-term boosts, as a result of climate change. In its latest weekly report, shipbroker Gibson said that “as hurricanes and storms become increasingly more severe due to climate change and warming sea temperatures, so too has the impact on tanker shipping. Hurricane Ida was upgraded to a category 4 storm and made landfall on Sunday 29th August; with a focus on the Louisiana area which accounts for 3.4mbpd of refining capacity.

Louisiana is home to 17 refineries, many of which were shut down due to widespread power outages and safety procedures. Estimates currently timetable a full return to normal operations in three weeks as power is restored, with 1.6mbd of capacity offline as of Thursday night. The US Government reported 94% of offshore production remained offline as of Thursday. If Ida’s damage results in prolonged pressure on exports, this could inevitably reduce tanker rates as reduced cargo volumes enter the market causing vessels to ballast away from the US Gulf (USG) region”.

According to Gibson, “last week saw TC2 rise on the news of potential disruption in the USG with numerous vessels going on subs and rates jumping 10 WS points from WS105 to WS115 on Friday. Rates firmed further on Tuesday given a tight position list in the then current fixing window that saw TC2 on subs at WS137.5. However, if affected refineries remain offline for several weeks then greater product imports through TC2 will be required to offset lower domestic supplies. This will be supported by US gasoline stocks at a seasonal five-year low. Whilst the end of driving season and moving into winter will reduce demand slightly, October is usually the peak month for US refinery maintenance, not delaying this would further squeeze fuel supplies. This could encourage reverse diesel arbitrage trade from Europe as well as East of Suez. Likewise, potentially lower US naphtha exports could force buyers to source alternative stocks from the Middle East or Europe”.

The shipbroker added that “elsewhere, the tanker market is not immune from other rate influencing weather events such as Turkish Strait delays, most notable in late autumn and winter or Baltic ice formations during the first few months of the year, both providing a positive seasonal impact on rates. Likewise, Typhoon season in Asia (mostly May-October) can also stimulate rates, given the port disruption this can cause. Although these events are only ever temporary, the short-term freight volatility they cause cannot be ignored”.

Source: Gibson Shipbrokers

Gibson concluded that “although the biggest single positive factor for the tanker market remains the post Covid-19 demand recovery and not weather seasonality, this does raise the question of how significant these weather events are in the short term. Looking ahead, increasing storm related disruption and spikes in freight rates should be expected as climate change continues to intensify extreme weather patterns across the globe. The US big freeze is perhaps one of the recent most notable examples of that. How this translates into market expectations by shipowners and charterers remains to be seen should a consistent global pattern emerge. What is certain is the weather impacts of climate change are increasingly going to impact the short-term dynamics of the tanker market susceptible to local climatic hazards”.

Marex Media