- Oil tanker rates rise for a second time this month as the producers, refiners and traders scramble to secure ships to transport crude or store.
- Freight rates for very large crude-oil carriers (VLCC) along the Middle East Gulf to China route were assessed at about $180,000 up from some $125,000 last week.
- Forward prices for VLCCs for the second quarter were trading at some $170,000 a day for the Middle East to China route.
- The contango spread between May and November Brent crude futures hit $13.45 a barrel and six-month spread for U.S. crude widened to minus $12.85 a barrel.
- Traders are increasingly seeking to store oil on tankers as onshore space becomes increasingly scarce.
- VLCC time charter rates for floating storage jumped to $120,000 per day from about $40,000 per day at the start of the month.
According to industry sources, supertanker freight rates doubled as producers, refiners and traders scramble to secure ships to transport crude or store, reports Reuters.
Freight rates on the rise
Supertanker freight rates were on the rise for a second time this month as the producers, refiners and traders scramble to secure ships to transport crude or store.
Middle East Gulf to China route VLCC rates
Freight rates for very large crude-oil carriers (VLCC) along the Middle East Gulf to China route were assessed at about $180,000 up from some $125,000 last week.
Anoop Singh, head of tanker research in Asia at Braemar ACM Shipbroking said “Its difficult to say whether or not the rates will be sustained, or at what levels, but generally looking at Saudi’s export plans for the coming months at more than 10 million barrels per day (bpd) – as well as the demand for floating storage – then you can expect freight rates to remain strong.”
He added forward prices for VLCCs for the second quarter were trading at some $170,000 a day for the Middle East to China route.
World oil demand to plunge
With world demand for oil forecast to plunge 15 million to 20 million bpd, a 20% drop from last year, traders are increasingly being forced to park crude in storage to take advantage of a record gap between spot and future prices.
Contango spread
The contango spread between May and November Brent crude futures has hit a record $13.45 a barrel while the six-month spread for U.S. crude widened to minus $12.85 a barrel, the biggest discount since February 2009.
Prices in the short term are lower than in future months. This encourages traders to store oil for sales in the future at a higher price.
No money trading cargo now!
Ashok Sharma, managing director of shipbroker BRS Baxi in Singapore said “Almost all the spot (tanker) deals right now have floating storage tied into them – that’s the only way to make money. You’re not going to make money trading the cargo now.”
Cheaper onshore storage space
Though onshore storage space is cheaper than floating storage, traders are increasingly seeking to store oil on tankers as onshore space becomes increasingly scarce.
Floating storage rates
According to shipping sources, VLCC time charter rates for floating storage jumped to as much as $120,000 per day by Monday, up from about $40,000 per day at the start of the month.
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Source: Reuters
