Oil traders have booked at least 17 VLCCs (each with a capacity to carry 2M barrels) to store crude oil in anticipation of a recovery in oil prices later this year.
Tonnage lists sent by tanker brokers to IHS Maritime show that Shell has booked five VLCCs while Swiss trader Vitol has booked four VLCCs.
Other charterers include Koch, Trafigura and Litasco.
The VLCCs have been booked for 6 to 12 months, with options to extend the hire for another year.
Although oil prices have crashed to levels not seen since the global financial crisis, analysts expect market equilibrium in 2H15.
Prices of Brent, Europe’s oil benchmark, closed at $47.43 per barrel yesterday, marking the first time since 2009 that prices fell below $50 per barrel.
A Singapore-based broker told IHS Maritime that strong storage demand for VLCCs has tipped the market in shipowners’ favour as they can demand higher freight rates.
“At the moment, there’s still a lot of oil being shipped as buyers take advantage of low prices,” said one broker. “The low orderbook means VLCC supply growth would be limited.”
Last year, 24 VLCCs were delivered and this year, 27 VLCCs are expected to hit the water, according to IHS Maritime’s Sea-web.com data.
Singapore-based Strait Shipbrokers said in a market note, “Humongous level (17 fixtures) of time-charter activity from traders and oil majors with storage options has been reported so far this year. This has given a fillip to the VLCC market and puts owners in a very strong position for the near future.”
Current spot rates on the benchmark Arabian Gulf-Far East route averaged Worldscale 70.04 or $82,514 per day.
With one-year TC rates assessed at $40,000 per day, it is more economical to book a VLCC to store crude than to trade oil.
However, tanker broker Charles R Weber Company Inc said in a market report that this situation may not last.
It said, “One obstacle to larger-scale short-term floating storage is the freight market itself; with VLCCs presently earning nearly $75,000/day and triangulated AG-US Gulf/Caribbean-Singapore-AG trades yielding about $82,931/day over 115 days, owners are not keen to part with their units for shorter-term storage contracts or TCs without commanding a premium compensating for the difference between the present one-year TC assessment of $40,000/day and present returns.”— IHS Maritime 360