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Tuesday
Nov012016

Atlantic Basin Clean Markets

With news of a fire at the Colonial Pipeline - clean rates spiked significantly (in case you were wondering why STNG shot up today).

With clean products from the USG to the USAC unable to move via pipeline - the natural back up plan would be to ship more of them from Europe into the USAC. Rates on the TC2 route shot from WS 87 to WS 150 - which adds roughly $1/bbl to the delivered cost.  Viewed in terms of what that means to Owners - their TCE jumped from $5k/day to $18k/day.  That said - there is talk that the pipeline will be repaired in short order - implying rates will come down pretty quickly.  If, however, the pipeline doesn’t get repaired within a week or so, Owners smell blood and will hold out for the high rates seen today - maybe higher.

Worth noting is that the USG export market should also benefit from this - since product that would normally be moved via pipeline will likely be moved on ocean going tonnage - either Jones Act or international flag - implying the TC14 market could move up as well.

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