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OSG Jones Act Tanker Secures Record-Breaking Charter

OSG Jones Act Tanker Secures Record-Breaking Charter

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December 17, 2013

reuters_logo1By Anna Louie Sussman

NEW YORK, Dec 17 (Reuters) – A Jones Act tanker was recently chartered for six months at a record high rate of $110,000 per day, market sources said, the latest sign of how surging U.S. crude production is squeezing the niche market for U.S.-flagged vessels.

ExxonMobil Corp last week agreed to renew its charter agreement for the 337,000-barrel Overseas Cascade at an unprecedented $110,000 a day, nearly a 50 percent increase from its previous rate for the same ship this summer, shipping sources said.

The century-old Jones Act requires all vessels operating between U.S. ports to be U.S.-built, U.S.-owned and U.S.-crewed in order to protect the U.S. commercial maritime industry.

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ExxonMobil had been reletting the Overseas Cascade from Brazilian state-run oil company Petrobras for over a year, renewing at six-month intervals. The new rate will take effect in January and last six months, with an option to extend for another six months, market sources said. The rate does not include fuel.

“It’s difficult for me to agree that this is the new normal, but I do believe that rates will go up,” said one person involved in the Jones Act market, who declined to be identified. “We’re on a trajectory, and you’re going to see blips that cause highs and blips that cause lows.”

Rates for Jones Act tankers, previously used primarily to ferry gasoline and diesel from Gulf Coast refiners to Florida or the East Coast, have surged this year as traders redirected half a dozen vessels to carry Eagle Ford crude from the port of Corpus Christi to refiners up the coast in Texas and Louisiana.

There are fewer than 50 tankers currently moving crude oil and refined products between U.S. ports. About a dozen trade strictly between Alaskan production sites and refineries on the West Coast.

Petrobras has the Overseas Cascade, built in 2009, on a five-year charter from shipowner OSG Ship Management Inc, which is currently in Chapter 11 bankruptcy.

For the past six months, the Overseas Cascade has carried gasoline and refined products from Port Arthur, Texas, to Port Everglades in Florida, according to shiptracking data from Reuters Eikon. Shipping sources said it is expected to continue this trade.

In June, a similarly sized tanker went for the previous record of $100,000 per day when the American Phoenix was relet by ExxonMobil from Koch Shipping and Supply.

© 2013 Thomson Reuters. All rights reserved.

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