Tuesday, May 05, 2009
Up to 56 VLCCs could be fixed for floating storage
Tuesday, 05 May 2009
Analysts and traders say some 100 million barrels of crude oil are currently being stored aboard VLCCs around the world in Europe, West Africa, the US Gulf and off Asian ports. Given that one VLCC on average carries about 1.8 million barrels, that suggests there could be up to 56 VLCCs employed for floating storage purposes.
Historically, high volumes of floating storage put upward pressure on spot freight rates due to vessels being taken out of the availability list.
But “the VLCC spot market is still very weak, with rates and earnings still flat around record lows, even though more and more VLCCs are supposedly being taken out of normal duty,” said one broker to Tankerworld on Monday.
“That shows you how massive tonnage oversupply is in the market at present,” he added.
Traders tell Tankerworld that storage has become attractive due to contango in the crude oil market, with near-term futures contracts cheaper than contracts further into the future.
To lock in a profit from the contango, traders buy discounted prompt crude, store it, and simultaneously sell barrels for delivery in future months.
An oil consultant had said in December that the contango then was the biggest for a 12-month span of futures since 1998.
A Singapore-based charterer told Tankerworld on Monday the fact that VLCC spot hire rates are “extremely low” at present is actually fuelling even more floating storage volumes, since storage costs are suppressed and “oil demand is not recovering by any standards at the moment”.
Source: TankerWorld
0 comments:
Post a Comment