- Lack of ullage at the tank farms in Qingdao port has forced VLCCs to wait for up to three weeks.
- Currently, 20 VLCCs are queueing to offload the crude oil onboard.
- Another 19 ships scheduled to arrive in the coming week.
- Many VLCCs that arrived in mid-May are still waiting for berth allocations to discharge the oil.
- Even with deep OPEC+ cuts, rates are still holding and not many VLCCs are available.
According to an article published in Platts and Vickey Du, the lack of ullage at the tank farms of China’s key Qingdao port has forced VLCCs to arrive at the port to wait for up to three weeks before being able to discharge their cargoes.
20 VLCCs queueing to offload the crude oil
There are currently 20 VLCCs queueing to offload the crude oil on board as the port battles the buildup of inventories, with another 19 ships scheduled to arrive in the coming week.
Many VLCCs that arrived in mid-May are still waiting for berth allocations to discharge the oil, according to a shipping agency vessel line-up document seen by S&P Global Platts.
“For the first five months of this year China had an implied stock build of up to 195 million barrels for crude oil, the bulk of which occurred in February and March,“ Wu Kang, head of Asia analytics at S&P Global Platts Analytics said.
Several VLCCs await berthing slots
Several VLCCs have had to wait for a week to be allotted a berth and the waiting time depends on whether the receiver of the crude has enough ullage or space at the shore tanks to store the oil, a shipping agency source said.“If a receiver has tanks to receive, a berth can be allocated in one to two days,“ the agency source added.
The VLCCs chartered by state owned companies, including Unipec, have a quicker turnaround with some of these ships being allocated a berth upon arrival at the port, while the tonnage chartered by the independent, privately-owned “teapot“ refineries have experienced longer waiting times.
The 2011-built Sandra, which arrived in Qingdao on May 13, is one of the VLCCs in the queue at Dongjiakou, one of four port areas at Qingdao. The ship is still waiting for a berth to offload its crude oil cargo and the receiver of the cargo is one of China’s teapot refineries, Shandong Luqing Petrochemical, which is located at Shandong province. The congestion is expected to worsen with an additional 19 VLCCs — 13 in Qingdao and six at Rizhao — scheduled to arrive from June 3 until June 10. The four port areas at Qingdao are Dagang, Qianwan, Huangdong and Dongjiakou.
OPEC+ cuts offset by tighter tonnage supply
The frenzied pace at which Chinese oil companies were picking up crude oil tankers when international crude markers plunged to historic lows in April has resulted in a large number of ships arriving at Chinese ports in May and June.
“Even with deep OPEC+ cuts, the [freight] rates are still holding and not that many VLCCs are available. Compared with other crude tanker sizes, the VLCCs are doing very well,“ a shipbroker said. According to a chartering source, the position list has remained reasonably short, which is causing certain loading windows to firm on the freight levels.
The daily earnings of a VLCC on the Middle East Gulf to China is around mid-$50,000 per day, according to a shipbroker’s estimates. As congestion at the Chinese ports build up, an armada of VLCCs carrying Saudi Arabian crude is expected to arrive at the US Gulf Coast over end-May to early-June, which will most likely result in ships being held up, putting a cap on the tonnage supply side.
This could be the silver lining for the VLCC market, especially when crude oil inventories are high and refinery utilization levels are low globally due to the COVID-19 pandemic.
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