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Pipeline cyber attack triggers transatlantic tanker boost

Tanker diversions and increased demand for Europe-loading ships expected as 2.5m bpd Colonial pipeline linking US Gulf refineries to consumers in the northeast coast remains closed

Transatlantic daily tanker earnings surge 117% in one day to nearly $20,000 as traders seek medium range tankers to refined product shipments into Atlantic coast

CHARTER rates for transatlantic product tankers surged 117% overnight as oil traders sought tonnage to ship or store gasoline from the US Gulf after a cyber attack shut the country’s biggest pipeline linking the region’s refineries to the northeast Atlantic coast.

The average time charter equivalent rate equated to $19,238 per day for a transatlantic round voyage, according to the London-based Baltic Exchange. That is up from $8,842 daily on Friday and the highest since August in the past year, data show.

The 5,500-mile Colonial pipeline, which delivers gasoline, jet fuel and diesel to consumers, airports and storage terminals, ships 2.5m barrels per day, according to shipbroker Braemar ACM, citing government data.

The move is likely to bring significant short-term disruption to transatlantic seaborne diesel and gasoline flows.

“Traders are reportedly seeking vessels to ship gasoline that would otherwise been shipped on the pipeline,” Braemar ACM said in an email on May 10. “Some tankers are being secured to store gasoline at the US in the event of a prolonged shutdown.”

Some 1.16m bpd of middle distillates and 1.4m bpd of gasoline are shipped daily on the pipeline, supplying the area with 45% of demand, the report said.

Colonial pipeline’s operators said in a May 9 notice that its four main lines remained offline after a ransomware attack two days earlier, while smaller lateral lines between its terminals and delivery points had resumed operations. It has given no indication when others would restart.

Braemar ACM said Valero chartered the 2013-built, 49,996 dwt tanker Nave Titan (IMO: 9487469) for product storage, citing market sources.

Vessel-tracking also shows that MR product tanker Pacific Jesper (IMO: 9788552), chartered by Petroineos to deliver gasoline to the US Gulf from Lavera, France, has stopped between the Florida and the Bahamas coastlines.

The tanker is likely to divert, if possible, to the New York coast, where prices for spot gasoline are estimated to rise sharply the longer the pipeline remains closed.

Very little gasoline and diesel is shipped via tankers to the east coast from the US Gulf because the longstanding US Jones Act prohibits cabotage trade to foreign-flagged, foreign-built and foreign-crewed ships.

Waivers were granted in 2017 and 2012 by the Department of Homeland Security after storms Harvey and Irma, and superstorm Sandy in 2012.

If such provisions were made for this event, this would offer a lifeline to medium range tanker operators and owners in the transatlantic market, where rates have been depressed for the last nine months.

Lucrative reverse-arbitrage plays for middle distillates are likely to open up to ship diesel and jet fuel to east coast destinations from Europe and elsewhere.

The northeast and Atlantic coast of the US imports about 440,000 bpd of gasoline in February, with some 160,000 bpd of that from Canada, according to the US Energy Information Administration.

Refineries in northwest Europe and the Mediterranean make up most of the rest and if no waiver is granted this is likely to boost demand for MR tankers in coming days to make the voyage.

If prices for middle distillates rise in New York, it will be profitable for traders to buy jet fuel in diesel in Europe and ship to the east coast for sale at a profit.

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