Oil Tankers in Asia Suffers Due to Wobbly Oil Market
Some 15 km (9 miles) from the bustling port of Singapore, a rusting tanker as big as the world’s largest aircraft carriers lies idle in a muddy estuary flanked by mangrove trees on the coast of southern Malaysia.
What does it state? A precarious condition in oil markets present in Asia and its influence on the oil tankers. One such example is the 340-metre (1,115 ft) “FPSO Opportunity”, a hulking so-called Floating Production, Storage and Offloading (FPSO) vessel capable of drilling for oil in deep waters, is currently surplus to requirements along with scores of other rigs, tankers and support vessels in an era of cheap oil.
Could it be industry’s miscalculated market conditions the cause behind this sort of scenario. According to David Fyfe, head of research at oil and commodity trading firm Gunvor, “There was a misguided focus on scarcity in the supply side from the early 2000s.”
“As an industry, they were complacent. They thought because cost was high, prices will remain high … (but) then there was the advent of shale. Since that period, there is a realization that there is no scarcity of oil.”
The shale revolution turned the United States into one of the world’s biggest oil producers, at a time when exporters in the Middle East and Russia were also pumping out record volumes, causing oil prices LCOc1 to more than halve since mid-2014 to under $50 per barrel.
The armada of laid-up vessels shows how the shale boom caught the oil industry off guard and scuppered plans to drill for new fields.
This means that some of the idled vessels may have to be scrapped in yards in countries such as India or Bangladesh, although shippers say the current cost of the journey may be more than their scrap value.
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