International Product Carrier

The petroleum products trade is quite different from the crude oil trade. While the crude oil trade covers refinery inputs, the petroleum products trade transports the output of the refineries. Seaborne product trades are more complex than those of crude oil because they involve a wide range of product types and a larger base of potential importers and exporters. The products that are moved in product carriers can be divided into two broad categories: petroleum products consisting of gasoline, jet fuel, diesel fuel, kerosene, clean condensates, naphtha, etc., and petroleum products such as fuel oil and heating oil.

The key variables affecting the seaborne trade for refined products are the underlying demand in the key consuming regions, local and regional refining capacity relative to demand by product type, regional differences in refining margins, and regional pricing differentials (leading to arbitrage opportunities).

Petroleum products are transported for several reasons:

• Many product carriers are employed on so-called deficit trades. These are regular trades between an area of surplus and an area of shortage. These deficit trades are the result of regional imbalances in refining capacity. Some regional shortages are structural, such as in the United States, where product demand will continue to exceed refining capacity, as no new refineries are planned.In other regions, such as China, where demand grows faster than refinery capacity can be added, these shortages are expected to be temporary
• Balancing trades are caused by the fact that the product mix of local refineries does not always match local demand. The regular trade in gasoline and diesel fuel between Europe and the United States is an example of this. In their efforts to produce enough diesel fuel, refineries in Western Europe produce too much gasoline for the local market. In the United States however, there has traditionally been a shortage of gasoline and a surplus of diesel. So it is natural for oil companies and oil traders to move the diesel surplus from the U.S. to Europe and to transport gasoline in the opposite direction, provided that the economics make sense.
• Unusual price differentials between regions can trigger temporary product movements.Sometimes, local refiners export a product, even if there is a domestic shortage, because the export prices are higher than the domestic prices. These trades are called arbitrage trades.

Product carriers are more sophisticated vessels than crude oil tankers because they have to be capable of carrying different types of cargoes. Dedicated product carriers have coated cargo tanks that are easy to drain and clean and that protect the cargo from contamination. Product carriers tend to be smaller than crude tankers and the Handysize product tanker (30,000 to 50,000 dwt) is the workhorse of the industry. These vessels are primarily used in the short-haul intra-regional product trades, where their size and flexibility affords significant potential for higher utilization rates. Larger ships, such as Panamax and Aframax product tankers are increasingly being employed on long-haul product routes originating from the Middle East to take advantage of economies of scale.

Rapidly growing demand for oil products, combined with a shortage of suitable refining capacity in certain regions of the world has led to a significant increase in refined product movements in recent years. These developments are likely to persist in the coming years and will create further growth in employment opportunities for product carriers.