The current drop in oil prices has led to the re-igniting of inquiry into floating storage.
London broking house EA Gibson said that tonnage was being sought last week to take advantage of the perceived contango in oil prices.
Last week, Brent crude fell to its lowest level since April 2013 and way below this year’s high of $115.06 per tonne seen in in Mid-June.
On its own, the differential between the forward and the current oil price appeared to be insufficient to make floating storage profitable, Gibson said. The margins are currently a lot tighter than when storage became popular in 2009/10,which led to artificial support for the tanker sector.
Gibson pointed out that there are other factors besides the actual cost of chartering the tanker for storage to be taken into consideration, such as the cost of insurance and bunkers, which vary depending on the storage location.
In recent months, there has been a surge in land-based storage, including at Saldanha Bay in South Africa, but no tankers, have been fixed thus far, except for the Unipec charter of the ULCC ‘TI Europe’ for six months, option six months for storage duties off Singapore, reported last week.
However, Gibson pointed out that this vessel was being used to store oil for strategic purposes rather than for asset play. “We are just not seeing additional tonnage on the radar being chartered for floating storage, despite rumours circulating in the market and of course, inquiry,” Gibson said.
Last week, a number of other factors came into play. For example, the IEA trimmed its 2014 oil demand growth by 150,000 barrels per day to 0.9 mill barrels per day, adjusting its projected demand for this year to 92.6 mill barrels per day.
Saudi Arabia said that last month the country had cut production by around 400,000 barrels per day amid signs of an oil glut. There was also a reluctance for crude oil tanker owners to get locked into short term timecharters, as the normal winter spike approaches.
There is an anticipation/hope that this year’s winter spike will reach even higher levels than seen last winter. Therefore, owners are preferring to remain in the spot market, rather than loosing out to a fixed short term rate, Gibson said.
Mr. Copperstone, this is great insight on how the industry is conveniently setting aside the crude oil like a time capsule for later purposes. Does it age well? or deteriorate over time? Oil in fact is timeless but compromised when it is handled on different platforms...just an abstract point. Additionally, Reuters states that oil found nested in vessels is the latest sign that soaring oil supplies and tumbling prices are prompting traders to store crude in volumes not seen since the financial crisis more than five years ago. Analysts estimate more than 50 million barrels of oil may already be placed in storage.
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