Trad­ing gi­ants seek oil stor­age at sea as virus cre­ates glut

Muscat Daily - - BUSINESS -

Sin­ga­pore - Three of the world’s largest oil traders are seek­ing to store crude on tankers at sea as the in­dus­try tries to deal with a glut that’s emerged since the out­break of the coro­n­avirus in China.

Vi­tol SA, Royal Dutch Shell Plc and Li­tasco SA are among firms ask­ing about hir­ing su­per­tankers for stor­age pur­poses as a sharp drop in Chi­nese de­mand due to the coro­n­avirus prompts re­quests for cargo de­fer­ments, ac­cord­ing to peo­ple fa­mil­iar with the mat­ter, ship­bro­kers and oil traders. Two oil tanker own­ers said last week that there was ris­ing de­mand to store, with­out iden­ti­fy­ing the com­pa­nies mak­ing the re­quests.

While the emer­gence of float­ing stor­age will come as lit­tle shock to an oil mar­ket whose main source of de­mand growth - - China - has been hit hard by the virus out­break, it shows the scale of the buy­ing weak­ness in the Asian coun­try. Stor­ing doesn’t look prof­itable on pa­per and keep­ing bar­rels at sea would nor­mally be more ex­pen­sive than land-based op­tions.

For Shell and Vi­tol, the re­quests are sim­ply to find ships to store bar­rels for a sev­eral weeks or months. Traders some­times ask for reg­u­lar cargo char­ters to in­clude stor­age op­tions. Of­fi­cials from all three com­pa­nies de­clined to com­ment. It’s not clear if any of the com­pa­nies has booked a ves­sel yet, and traders will some­times ask for prices to cal­cu­late the vi­a­bil­ity of a trade.

Chi­nese re­fin­ers have cut the amount of crude they’re turn­ing into fu­els by about 15 per cent - a re­duc­tion of about 2mn bar­rels a day - as the deadly out­break hin­ders the move­ment of peo­ple and hits de­mand for travel. The fall in pro­cess­ing has prompted re-of­fers for grades such as Brazil’s Lula, as well as West African crudes as buy­ers try to back out of pur­chases.

Costs of char­ter­ing a very­large crude car­rier with ca­pac­ity of 2mn bar­rels were US$30,000-US$33,000 a day, said two ship­bro­kers. While the one-month con­tango struc­ture of about 30 cents per bar­rel would be in­suf­fi­cient to off­set the to­tal cost of char­ter­ing the su­per­tanker, it does partly cover the ex­penses.

Newspapers in English

Newspapers from Oman

© PressReader. All rights reserved.