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Mediterranean, Black Sea FOB crude oil markets plunge as freight rates soar

http://www.chemnet.com   Nov 21,2014 Platts
Soaring freight rates in the Mediterranean and Black Sea over the last week have pushed FOB crude differentials in the region to multi-month lows.

On Wednesday, Aframax cargoes of CPC Blend, FOB basis the CPC Blend terminal North of Novorossiisk, were assessed at a $2.735/barrel discount to the Mediterranean Dated Strip, the lowest level it has been versus the 13-28 day Dated Brent strip since early July.

The drop in Azeri Light FOB differentials has been even more pronounced, with Aframax Azeri cargoes, FOB basis the Georgian port of Supsa, dropping to their lowest levels in the history of the Platts assessment, which dates back to mid-2010.

Platts calculates FOB values for many regional crudes as a freight netback to a central Mediterranean, CIF delivered price.

Traders said that the recent surge in freight rates along the Black Sea-Mediterranean and Cross-Mediterranean routes had seen FOB rates plummet in the region, even as CIF and CFR markets become more in demand.

"Azeri is doing OK because it is [priced on a delivered basis] and freight is high," a crude trader said. "Buyers prefer to stick with [delivered] barrels in this environment."

Delays in the Turkish Straits have left an extremely restricted tonnage list for charterers to choose from in both the Mediterranean and the Black Sea, according to shipping sources.

Freight rates on the Black Sea-Med route, basis 80,000 mt, jumped by over Worldscale 100 in just over a week, from w122.5 Tuesday November 11 to w227.5 Wednesday November 19.

Cold weather and fog has led to longer transit times for tankers through the Turkish Straits, a common concern in the region throughout the winter months.

Platts assessed the delays at five days Northbound and five days Southbound Wednesday.

The number of ships held up in the Straits has caused a tightening of the Black Sea and Mediterranean position lists.

"The ships are stacking up in the Straits, the list of ships waiting there is already long and is growing. If you want to get to the Black Sea you need to pick ships up earlier," said a charterer.
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