By Ann Koh, Serene Cheong and Laura Blewitt (Bloomberg) — Over the course of March, the oil tanker Nave Pyxis will slice through the Pacific Ocean as it makes an unusual journey of about 8,000 miles from China to Mexico.
Its cargo: almost 300,000 barrels of gasoline to power cars that zip through the Latin American country. A number of disparate events — maintenance work at refineries along the American Gulf Coast, plant-crippling natural disasters in Mexico and a supply boom in China — have converged to allow the Asian nation to dip its toes into what has traditionally been a U.S. market.
The Nave Pyxis is making its voyage less than two months after the Maersk Penguin began sailing 14,500 miles from the Netherlands to Australia in another rare journey, showing how traders are seeking to take advantage of rapidly shifting gasoline prices across the globe. While two other ships are sailing to Botany Bay in Sydney from Europe, at least three tankers are scheduled to ferry fuel from Asia to North America in coming days.
“Everybody’s looking at where’s the most efficient source of supply, what’s the bottom line,” said John Driscoll, chief strategist at JTD Energy Services Pte. “It’s not normal to see gasoline coming from China to Mexico.”
Seaborne oil-products trade is set to expand 3.1 percent to 1.131 billion metric tons in 2018, a faster rate of growth than last year’s 2.8 percent, according to Clarkson Research Services, a unit of the world’s biggest shipbroker. It had grown 4.4 percent in 2016 and 6.8 percent a year before that.
In the case of the Nave Pyxis, the journey is being made possible because Mexican refineries operating at less than half of their crude processing capacity aren’t pumping out enough gasoline to meet demand. Some plants are undergoing repairs at a time when U.S. Gulf Coast refiners that typically supply the country are conducting their own maintenance work. Meanwhile, China’s producing more than it needs and shipping out the surplus.
Chinese gasoline going to Mexico shows that the Asian nation’s supplies are now competitive with exports from the U.S. Gulf Coast, said Driscoll, who has spent more than 30 years in the petroleum trading industry in Singapore. “The other alternative for Mexico is to get product from the U.S. Gulf Coast. If you can import from Asia and land it at a cheaper price, then OK, you don’t need the exports from the U.S.”
Still, Matthew Smith, director of commodity research at ClipperData LLC, a firm that analyzes and tracks oil flows globally, expects such shipments to remain sporadic. “Even amid all its refinery troubles last year, Mexico only received deliveries from Asia in five out of twelve months,” he said.
“Mexican refinery runs are set to climb in the coming months, barring unforeseen outages,” Smith said. “They will continue to lean on the U.S., and to a much, much lesser extent, Northwest Europe, to meet any supply shortfall, given closer proximity.”
Gasoline futures in New York traded at $1.8823 a gallon at 4:01 p.m. in Singapore.
At the other end of the world, Sydney-based Caltex Australia Ltd. said it imported a gasoline cargo from Rotterdam because it was offered “a very good price” on the shipment which made it competitive with supply from Asia.
Other analysts also echoed the view of JTD’s Driscoll that traders were venturing farther and completing trades seldom attempted before to capture opportunities presented by shifting market dynamics.
When asked whether the price of the gasoline cargo that arrived from Europe was competitive versus Asian supply, Caltex Chief Financial Officer Simon Hepworth said, “We wouldn’t do anything that wasn’t financially the right outcome.”
© 2018 Bloomberg L.P
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