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VLCC Backlog Builds at Iraq’s Basra Port After Bad Weather

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April 1, 2015

reuters_logo1By Keith Wallis

SINGAPORE, April 1 (Reuters) – A backlog of over 30 oil tankers has built up outside the Iraqi port of Basra and shippers face lengthy delays of up to three weeks to load oil because of bad weather and possible oil quality issues, shipping industry sources said.

The problems could delay or limit the number of oil export cargoes from Basra in April, potentially pushing down tanker freight rates, two Singapore ship brokers familiar with the issue said.

More than 30 oil tankers, two-thirds of them supertankers (VLCC), with a combined capacity of around 50 million barrels are currently lying outside Basra, some of them since mid-March, Reuters shipping data shows.

“The bad weather (in February) has caused all these delays,” said Sadiq Jaafar, head of marine consultancy firm Sadiq Jaafar & Associates in Baghdad.

The strong winds and storms created a backlog into March and April, said two other maritime sources in Iraq.

The usual waiting time is about five days, one broker said, yet shipping data shows that some tankers have been waiting to load for nearly three weeks at a daily charter rate of around $48,000-$50,000 a day per ship since early March.

The delays could affect the total number of cargoes being chartered from the Middle East, while delays in chartering tankers could result in a drop in freight rates.

“By accepting less quantities to be lifted during March and April, this issue may be resolved over the coming 60 days,” the source said.

Shipbrokers have seen a drop in cargo numbers being fixed from the Middle East in the first 10 days of April. “We’re some 16 fixtures down,” said one broker.

VLCC rates from the Middle East to Asia have fallen by around $10,000 per day, or about 14 percent, since Feb. 24 as the number of ships waiting for charters outpaced cargo volumes, chartering data showed.

The drop-off in cargoes comes after oil exports from Iraq’s southern fields rose to an average of 2.66 million barrels per day (bpd) in the first 18 days of March, close to last December’s 2.76 million bpd record and well up 2.29 million bpd in February, when bad weather affected loading.

Beyond bad weather, loading delays may also have been caused by oil not meeting quality specifications.

At least one recent cargo was “not useable because it wasn’t the right grade,” one broker said, although sources in Iraq denied this.

Basra’s quality swings from a heavy oil with API gravity at 26 degrees to a medium type at 34 degrees.

Iraq plans to split south Basra oil production into two grades, with a heavier type of crude offered from May.

(Editing by Henning Gloystein and Richard Pullin)

(c) 2015 Thomson Reuters, All Rights Reserved

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