Floating Storage May Rise in SE Asia
Oil traders plan to fill storage tanks and ships with crude in the third quarter to ride out a low demand season in Asia, hoping to cash out in the fourth quarter when prices rise, shipping and trading sources said on Tuesday.
At least two trading houses have chartered supertankers to store crude off Singapore, taking advantage of lower freight rates and spot crude prices. More oil is expected to head into regional tanks ahead of the September to November refinery maintenance season.
"Traders are trying to bottom-fish (for crude bargains) and store for one to two months before re-selling," a trader with a western firm said.
Clearlake, the tanker chartering arm of Gunvor, has chartered the 300,000 dwt VLCC Arenza XXVII at $33,000 per day for one to four months, a Singapore-based shipbroker said. VLCCs can hold up to 2 million barrels.
ST Shipping, Glencore's shipping arm, booked the 300,000 dwt Plata Glory for a month at $22,000 a day and has the option to extend at daily rates of $26,000 and $29,000 for the second and third month, brokers said.
Rates for a one-year VLCC charter have fallen by almost $20,000 since January, to between $38,000 and $42,000 a day last week, according to shipping services firm Clarkson. They were $47,500 per day a year ago, Clarkson data showed.
Crude supply disruptions and strong global consumption have sped up the pace of a market re-balancing, narrowing the gap between prompt and future-dated prices, leading traders to release stored oil starting in June.
The number of tankers used for oil storage around Singapore fell to 30 this month from 40 in May, live shipping data on the Eikon terminal compiled by the Reuters Oil and Analytics team showed.
Unsold crude cargoes for loading in August have piled up as Asian refiners head for maintenance. Spot differentials for August-loading cargoes have dropped after monthly prices from Middle East crude sellers rose. About 1 million barrels a day of processing capacity in Asia will be shut for maintenance in October, according to Reuters calculations.
Russian ESPO crude and Abu Dhabi's Murban are seen as prime candidates for storage as traders bet on a price rebound.
Still, the current contango structure might not fully cover storage costs, making it risky to hold onto oil for long.
"They will need to manage oil in storage actively since the contango has only widened for prompt months," a Singapore-based trader said.