Home NewsEnergy | Petroleum Oil tanker market in harsher seas

Oil tanker market in harsher seas

by Bunkerist
0 comment

With the unexpected, voluntary cuts of the largest oil producer, Saudi Arabia, the volume of crude oil stored on ships decreased. The appearance of super tankers is under pressure and there has been an abundance of ships that could be chartered.

In 2020, the earnings of very large crude oil ships (VLCCs) reached a record high of more than $ 240,000 a day, as the coronavirus weakened demand and creating a struggle for surplus oil and storage on land and sea. Since then rates have dropped to $ 7,000 a day.

Currently, the situation is really bad for the VLCC market. There is problem with floating storage and the return of this tonnage to the spot market has come under pressure.

1 million barrels of Saudi production loss per day equates to the destruction of 23 VLCC’s annual tanker demand.

Some analysts estimated that as of Jan. 22, 95 vessels – the equivalent of 130 million barrels – were being used for storage versus a peak of over 290 million barrels in May last year.

The volumes on ships – also static for 14 or more days – had dropped to 52 million barrels, the lowest level since the peak in mid-2020 when it reached 190 million barrels. A repeat of last year’s floating storage boom in 2021 is not expected.

It is expected to further support oil prices in the near term, as the reduction in storage is seen as an indication of recovery in demand.

The figures do not include oil in the Iranian fleet and non-commercial long-term storage by companies.

When the crisis was at its peak last year, demand for floating storage was driven by a contango that encouraged traders to store fuel until the price rose. Contango is a price structure in which shipments to be delivered in a shorter term are cheaper than subsequent deliveries.

Leave a Comment