The move is significant because traditionally, for several years Red Sea to Far East LR1 fixtures have been concluded at a discount to the PG-East Worldscale rate.

 

　　“Rates for loadings in the Red Sea are date-sensitive and depending on the specific laycan could be either at a premium or a discount to the Persian Gulf-East rates,” a source at a clean tankers owner said.

 

　　It is a dynamic market where the differential on the Red Sea-East versus the PG-East rates can swing either way, the source said.

 

　　Not many ships are naturally opening in the Red Sea and with the flat rates being higher for voyages from the Red Sea to Far East ports in comparison with the Persian Gulf-East runs, the owners could afford to give a discount vis-a-vis the latter.

 

　　However, with the commissioning of Yasref’s refinery in Yanbu, demand to load cargoes from Red Sea has been steadily increasing, market participants said.

 

　　There is also a stiff competition for tonnage between ports in the Red Sea and those in the Persian Gulf after ADNOC’s expansion of the Ruwais refinery last year and the Satorp refinery at Jubail becoming fully operational since the third quarter of 2014.

 

　　This has prompted charterers on Red Sea-East routes to pay Worldscale rates at par with or higher than on the PG-East rates, they said.

 

　　“In recent weeks not many ships have been available in Red Sea and hence the premium,” said a clean tankers broker in Singapore.

 

　　“The European market for Long Range tankers is not doing very well and so maybe owners [with ships] in the Mediterranean can give some discount for cargoes loading in the Red Sea,” a senior executive with a clean oil tankers owning company said.

 

　　For LR1 ships coming in from the Persian Gulf or East Asia, the rates for loading at a port in Red Sea will be around w7.5 points higher, the source said.

 

　　Some charterers insist that the discount for Red Sea loadings is still valid.

 

　　Owners whose ships that are ballasting from East Asia to the Red Sea will be reluctant to give a discount but it is still easier to find a suitable LR1 when compared with an LR2, said a Tokyo-based chartering executive with a Japanese trading company.

 

　　Worldscale rates on the Red Sea-East Asia routes both for LR1s and LR2s depend on the port from which the ship is ballasting after discharging the previous cargo and those coming in from East Africa or the Mediterranean to the Red Sea can be the most suitable for the charterers, the executive said.

 

　　Recently, ATC has supplied cargoes from the Red Sea to its customers in East Asia but due to its own time-chartered fleet, it does not always source tonnage from the spot market.

 

　　Earlier this year, ATC had taken two LR2s from product tankers company Torm, on a three-year time charter each, according to sources.

 

　　At times, lifting of ATC cargoes from the ports in Red Sea is not in line with the itinerary of its own fleet of time-chartered ships, triggering a prompt requirement which will definitely go at a premium to the prevailing rates on the PG-East routes, sources said.

 

　　(Source: Platts)