Friday, June 19, 2009
Tankers storing oil glut seek shelter off Malta
Friday, 19 June 2009
A shoal of tankers has gathered around popular Mediterranean holiday spot Malta, storing enough oil to supply the EU's smallest island republic for nearly three years, Reuters data shows.
Shallow water, mild weather and its sheltered central Mediterranean location is becoming haven for tankers hired by oil and gas firms to exploit the market structure caused by the biggest fall in global oil demand in about 20 years, amid economic slowdown.
About six crude oil tankers, 20 oil product tankers and four liquefied natural gas (LNG) tankers are floating off Malta, the highest density of anchored tankers outside ports in the world, according to AISLive ship tracking data on Reuters.
That means at least 20 million barrels of oil, or about a quarter of the world's daily demand, are on the seas around Malta, while the data showed few in May.
"The ships have to float somewhere where they can get supplies etc, and they have to shelter somewhere," said one oil trader, whose company has stored some oil in tankers.
"The conditions sound good to me for anchoring. It has nothing to do with Malta."
Malta's total daily oil use is about 19,000 barrels a day or 0.2 percent of U.S. gasoline consumption.
Global oversupply has pulled down prompt oil prices to deep discounts to longer-dated contracts this year, or a market structure called contango, causing oil traders to store oil on land and at sea to make profit by selling later.
The trading play has piled up more than 110 million barrels of oil at sea across the globe, with most of them floating in Europe. Daily world oil consumption is about 83 million barrels.
Contango has been the steepest on the European oil futures market and European oil demand, especially gas oil for heating, has been falling more sharply than many other areas in the world.
Unusually, at least two newly built very large crude carriers, the largest type of such vessels, have been booked to store gluts of gas oil.
More ships, including crude tankers, are likely to arrive to seek shelter off Malta for a relatively long period of time until winter heating demand picks up and draws some oil from the tankers, traders said.
The oil derivatives market has shown deep discounts on gas oil to benchmark into the fourth quarter when gas oil turns to premiums, suggesting traders expect the gluts of these oil products to continue into winter.
"We need very cold winter to clear the overhang," another trader said.
"But it is months away."
LNG DEMAND
There is also a steep contango in the UK, Europe's biggest gas market, with prices for next winter almost double the current spot price because of an expected surge in winter heating demand.
But storing LNG in tankers for long periods is expensive because in most cases the valuable super-cooled gas slowly boils off and is lost and storage plays seem more likely closer to winter.
The world's largest LNG exporter Qatar uses a fleet of new tankers that can re-liquefy the gas onboard, making offshore storage possible.
Qatargas CEO Faisal Mohammed Al-Suwaidi said in May the company had used the waters around Malta to park some of those tankers for short periods but that he did not see offshore LNG storage there as a likely trend.
Oversupply in the global LNG market may be keeping the LNG tankers near Malta, awaiting orders to refill after delivering their cargoes last month.
The Tenaga Satu been off the east coast of Malta since May 27 after delivering to northwest France, while Qatargas' Tembek and two other tankers have been anchored there since early last month.
Source: Reuters
