LONDON (Reuters) – Merchants are storing an estimated file 160 million barrels of oil on ships – double the extent from two weeks in the past as they search to deal with a glut of shares created by a slide in world demand from the coronavirus, transport sources say.
FILE PHOTO: The Suezmax sized oil tanker Karvounis lies at anchor south of Port Fourchon, Louisiana, U.S. August 17, 2017. REUTERS/Jonathan Bachman
Group of the Petroleum Exporting International locations (OPEC) and different producers together with Russia have agreed a file minimize in output from Could of 9.7 million barrels per day, or nearly 10% of world provide, to assist help costs and curb oversupply.
On the identical time merchants have rushed to seek out storage on land and at sea in what’s believed to be the largest oil glut in historical past.
Transport sources mentioned oil held in floating storage on tankers had reached at the very least 160 million barrels together with 60 supertankers, often called very giant crude carriers (VLCCs), which might every maintain 2 million barrels.
This in contrast with 25 to 40 VLCCs already chartered with storage choices in the beginning of April and fewer than 10 VLCCs in February, the sources mentioned.
Smaller tankers had been additionally getting used, which was additionally boosting volumes being held at anchor, they added.
The final time floating storage reached ranges near this was in 2009, when merchants saved over 100 million barrels at sea earlier than offloading shares.
“That is an unprecedented time within the historical past of tankers and whereas VLCC tanker storage is garnering the headlines, smaller crude and product tankers are additionally getting used for storage,” Gregory Lewis, transport analyst with world monetary providers group BTIG, mentioned in a be aware this week.
Areas sometimes embrace the U.S. Gulf and Singapore, the place main oil hubs are located.
The crude market is presently buying and selling in what is named contango, the place ahead costs are increased than fast costs. This market construction encourages merchants to park barrels in storage within the hopes of promoting them for a revenue later.
There are over 770 VLCCs on the earth and analysts have estimated as many as 100 to 200 supertankers could possibly be deployed for floating storage in coming months.
“The eventual wind down of this stock glut can be most painful to tanker demand, however within the meantime floating storage stays the one outlet for a mismatched manufacturing and consumption backdrop,” mentioned Jonathan Chappell with funding banking advisory Evercore ISI.
Further reporting by Ron Bousso; Modifying by Peter Graff