Currently low oil prices have developed into some long-term bookings of supertankers, not for oil transport, but for crude oil storage. As reported by Reuters, oil traders Vitol, Trafigura and Shell are planning to store excess crude at sea until prices rebound, perhaps months from now. According to
Bloomberg, in 2014, oil prices collapsed 48 percent. What’s more, the market continues to be in contango, an environment where oil priced for future delivery is higher than spot prices. This could prove beneficial for tanker owners.
Vitol has contracted the TI Oceania Ultra Large Crude Carrier, a 3 million barrel capacity mega-ship and the 2 million barrel Maran Corona Very Large Crude Carrier. Trafigura has signed up the Nave Synergy, another Very Large Crude Carrier. Shell has hired two of these carriers, the Xin Run Yang and the Xin Tong Yang. Unipec, part of Chinese oil giant Sinopec, booked a 3.2 million barrel V-Plus TI Europe super tanker. The rental costs for these tankers is currently well below the price the firms can get for their oil.
Iran, whose worldwide sanctions have cut its exports by half, is also storing oil at sea. At this point Reuters estimates its fleet of supertankers is holding 30 million barrels of oil. NITC, Iran's national carrier, has deployed 15 VLCCs (each capable of holding 2 million barrels) to store Iran's unsold crude oil stocks off its coast. NITC owns a fleet capable of carrying 76 million barrels of oil. Iran has also stored oil at a facility in China.
Live Trading News explains the situation: “Crude Oil prices have plunged as the US pumps the most in 30 years and OPEC keeps its own production steady to retain market share”. While oil is in contango today, as of mid-March they report that the International Energy Agency sees a narrowing of the contango – the price of crude is rising enough to siphon off some need for at-sea storage. A reduction in the number of oil rigs in response to lower than expected returns has certainly contributed to this narrowing. With the summer driving season to begin soon, a higher demand may change this picture substantially in the US.
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