Terminal Backlogs Create Tanker Traffic Jams

It may be the world's biggest traffic jam.

As ports struggle to cope with a global oil glut, huge queues of supertankers have formed in some of the world's busiest sea lanes, where some 200 million barrels of crude lies waiting to be loaded or delivered.

The vessels, filled with oil worth around $7.5 billion at current market prices, would stretch for over 20 nm if formed up in one straight line.

One captain with more than 20 years at sea told Reuters his tanker had been anchored off Qingdao in northeastern China since late March and was unlikely to dock before the end of this week, a frustrating delay of more than three weeks.

"We've stayed here a long time," he said, requesting anonymity because he is not authorized to speak to the press, but added that another kind of jam was helping to alleviate the boredom.

"We have a piano, drums, crew who play guitar – they are not professional but they are coming good. We have more than 1,000 DVDs so there is no need to watch the same one 20 times."

The worst congestion is in the Middle East, as ports struggle to cope with soaring output available for export, and in Asia, where many ports have not been upgraded in time to deal with ravenous demand as consumers take advantage of cheap fuel.

"It's the worst I've seen at Qingdao," said a second tanker captain waiting to offload at the world's seventh busiest port, adding that his crew was killing time doing maintenance work.

Ralph Leszczynski, head of research at shipbroker Banchero Costa, in Singapore, said the snarl-up was "one of the worst tanker traffic jams in recent years".

The cause was "a perfect storm of red-hot demand from new entrant refineries in China and port infrastructure in the Middle East and Latin America that is unable to cope", he said.

MESSING UP THE SCHEDULE

Ship tracking data shows 125 supertankers, with the capacity to carry oil to supply energy-hungry China for three weeks, waiting in line at ports. The combined daily cost is $6.25 million, based on current ship hire rates of around $50,000-a-day.

While daily tanker fees are typically borne by the fuel buyer, the port delays have a knock-on affect across the shipping industry.

"It messes up port schedules, catering schedules, crew schedules and the schedules of delivering the transported goods," said one shipping logistics manager in Singapore. "It also raises the cost for pretty much everyone involved."

And for dealers, a month-long delay can turn a profitable trade into a painful loss.

"If you've bought 100,000 barrels of crude at $40 (a barrel) that'll cost you $4 million," said one oil trader.

"And if you've calculated another 1.5 million bucks for a month's worth of shipping, but you end up paying double that because your ship is stuck in port congestion, then that can seriously mess up everything from your schedule to your arbitrage profitability."

At the heart of the congestion is an unprecedented rise in global oil production, along with rising consumption.

Soaring output has pulled down oil prices by as much as 70 percent since 2014. That has helped spur demand from China's independent refiners, freed from government restrictions on imports just last year and gorging on plentiful crude, putting extra pressure on ports.

DRY SHIPS, BORED CREWS

The oil glut is also causing congestion between the main producer and consumer hubs.

Almost all supertankers heading to Asia pass by Singapore or adjacent facilities in southern Malaysia, the world's fuel station for tankers and also a global refinery and ship maintenance hub.

Shipping data shows that some 50 supertankers are currently anchored in or close to Singaporean waters for refueling, maintenance or waiting to deliver crude to refineries or be used as floating storage.

For sailors stuck a queue of anchored tankers, one of the biggest problems is simply wiling away the time.

"Some of the ships are well-equipped for their crews, but many aren't," said a Filipino sailor who left a very large crude carrier (VLCC) in March after a voyage to China.

"On my last one, we had no regular internet ... only an old TV with a couple of old DVD movies. The food is terrible and while waiting to offload we did pretty hard maintenance work. The sort of stuff you can't do when the engine is running."

Captain Alan Loynd, who spent more than 25 years at sea and is now a marine consultant, said long port delays were rare, but could be tedious and isolating when they happened.

And unlike in previous eras, having a couple of beers to break the monotony is usually out of the question.

"The chances of getting ashore are remote," he said. "A lot of ships are now dry, so there's no alcohol on board."