Traders take supertankers for likely storage of up to 30 mil barrels crude
Time：2015-01-13
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This equates to floating storage for almost 30 million barrels of crude.
Global oil majors Vitol, Shell and Trafigura are among companies that have taken very large crude or ultra large crude carriers on time charter for six to 12 months with an option to extend by up to a year, brokers, owners and charterers said.
The ships are expected to be delivered mostly in the Persian Gulf or Singapore with an option for storage, they said.
“Its very simple; this is the contango market playing out for you,” said a chartering source with a VLCC owner.
Some of the ships may be utilized for trading crude while others “may have disappeared quietly from the market [for storage],” said a VLCC broker in Singapore.
In a contango market, prices in the near term are cheaper than in the medium term, making it economically attractive to put oil into storage for sale further out. February ICE Brent crude is now at around a $3.58/b discount to May.
The willingness of owners to release ships on time charter at an almost 50% discount to spot rates has given a big fillip to floating storage, said a second VLCC broker in Singapore.
At current rates, owners can earn around $69,000/day chartering out VLCCs for a Persian Gulf to North Asia voyage, while the latest transactions in the time charter market are mostly between $33,500/day and $37,500/day.
“Owners believe their current level of earnings may not be sustainable and will fall steeply once the [refinery] maintenance season starts in March and therefore they are willing to charter out their ships for longer durations at lower rates,” the broker said.
Participants also noted it was financially attractive for older ships to grab floating storage opportunities as many oil majors are reluctant to use them for long haul voyages and they trade at a discount in the spot market.