Texas City hosts first supertanker as U.S. crude gushes out

By Alaric Nightingale on 4/27/2018

LONDON (Bloomberg) -- A 2 MMbbl-carrying supertanker arrived for the first time at a jetty in Texas City as surging U.S. oil output drives up incentives to export.

The Nave Quasar, a Very Large Crude Carrier, signaled from the jetty at the Gulf of Mexico terminal on Friday morning, according to vessel-tracking data compiled by Bloomberg.

The tanker is being brought into Enterprise Products Partners LP’s Texas City terminal to determine measurements for future VLCC loadings, at least of partial cargoes, according to a person familiar with the matter. Nave Quasar will not load any supplies at this time for shipment, the person said. This site’s water depth, also known as draft, needs to be increased to about 76 ft from 45 ft to enable supertankers to fully load. The company said it was too premature to discuss the project.

While profits from shipping U.S. oil overseas are surging on paper, the logistics to do so remain a challenge in a country that was set up for decades as an importer. The price of crude at Houston earlier this week tumbled to a record discount of more than $4/bbl relative to Brent, the international benchmark. Freight costs on a very large crude carrier for delivery to Asia would probably be less than half that, highlighting the potential return for companies with the ability to get oil onto ships.

Shipments on VLCCs have proven difficult from U.S. Gulf Coast ports where waters can be too shallow once carriers are fully loaded, meaning cargoes move on smaller ships. It still remains to be seen how much oil Nave Quasar will actually load. Another carrier, the Anne, tested at the Port of Corpus Christi last May but didn’t collect a cargo.

The deepening price discounts are already driving up exports, which soared to a record 2.3 MMbpd in the most recent data from the U.S. Energy Information Administration. The Louisiana Offshore Oil Port, known as the LOOP facility, started exports in February and will receive its third VLCC in May, according to a person familiar with the matter.

U.S. crude output surged to 10.59 MMbpd in the week to April 20, the highest in weekly data going back to 1983. The U.S. ended 40-year-old trade limits on crude exports in late 2015.

Lists of charters compiled by Bloomberg show the cost of recent U.S. Gulf of Mexico bookings to Asia would work out at about $1.50 to $2/bbl, depending on where in the continent the ships go.

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