Product Tankers Turn Back as European Storage Fills
Tankers laden with diesel heading from the U.S. Gulf Coast to Europe are turning around in mid-ocean as European storage is nearly filled to the brim.
At least three 37,000 tonne tankers - Vendome Street, Atlantic Star and Atlantic Titan - have made U-turns in the Atlantic ocean in recent days and are now heading back west, according to Reuters ship tracking.
It is unclear if the tankers will discharge their diesel cargoes in the Gulf Coast or will await new orders, according to traders and shipping brokers.
"European prices are so soft," one trader said. "Sellers must see better numbers."
The Vendome Street was more than three quarters of the way to Europe, turning around just 800 miles off the coast of Portugal. Ship brokers said a turnaround so late in the journey would come at a cost to the charterer.
European diesel prices and refining margins have collapsed in recent days to six-year lows as the market has been overwhelmed by imports from huge refineries in the United States, Russia, Asia and the Middle East.
At the same time, unusually mild temperatures in Europe and North America further limited demand for diesel and heating oil, ptting even more pressure on the market.
Gasoil stocks, which include diesel and heating oil, in the Amsterdam-Rotterdam-Antwerp storage hub climbed to a fresh record high last week.
Prompt Low Sulphur Gasoil futures, the European diesel benchmark, have been trading at sharp discount to later contracts, in what is known as contango, prompting traders to store product.
In some cases, traders opted to store product on tankers. At least 250,000 tonnes of diesel are currently anchored off Europe and the Mediterranean seeking a discharge port, according to traders.
"The idea is to keep tankers on the water as long as you can and try to find a stronger market," a trader said. (Editing by William Hardy)