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Offshore oil inventories close to record highs in 2009 exacerbated by overstocking
Apr 2,2020 11:34CST
The content below was translated by Tencent automatically for reference.

SMM: Beijing time on April 2 news, according to reports, the shipping industry sources said that oil trading banks use offshore tankers to store as much as 80 million barrels of oil, they are still looking for more tankers, because of the global oil glut, onshore oil storage sites will soon be exhausted.

The outbreak of the new crown virus triggered a 1/3 drop in global oil demand, coupled with the refusal of major oil producers such as Saudi Arabia and Russia to limit production, creating what is believed to be the largest oil glut in history, with trading houses looking for oil storage warehouses.

The last time offshore oil stocks reached a similar level was in 2009, when trading banks had more than 100m barrels of oil at sea, followed by a gradual decline in inventories.

There are more than 770 supertankers in the world, each carrying a maximum of 2 million barrels of oil. Shipping sources estimate that there are currently 25 to 40 supertankers (VLCC) used to store oil offshore.

Offshore oil storage sites usually include the Gulf of Mexico and Singapore, both of which are major oil hubs.

By contrast, fewer than 10 supertankers were used for offshore oil storage in February.

There is currently a so-called "positive spread" in the crude oil market, in which the forward price of crude oil is higher than the spot price. This market structure encourages trading firms to store oil in the hope of making a profit when prices rebound in the future.

Richard Matthews, head of research at shipbroker E.A. Gibson, estimates that at least 31 supertankers were chartered in March for up to 12 months, possibly partly with pre-stored oil.

By contrast, four supertankers with leases of up to 12 months in February could be used to store oil, Matthews added.

Tanker daily rental costs have surged this week to a record high of more than $230000, at $200000 a day around March 12. Trading banks must pay a premium for long-term leases.

Robert Hvide MacLeod, chief executive of Frontline (FRO.OL), the world's leading tanker carrier, describes this as "only once in a generation".

"it's really starting now-cruise oil storage is about to change the market and completely change 2020," he told a digital forum on Capital Link on Tuesday.

Nikolas Tsakos, chief executive of Tsakos Energy Navigation (TNP.N, added that there was also growing interest in smaller Afra tankers.

"We are one of the few industries that are going through a strong cycle and we see a lot of interest in oil storage. At present, the oil market is showing a positive spread, "he said on the forum."

Trade sources said on Wednesday that crude oil and finished oil storage tanks in (FOIZ), the Fuchaila oil industrial zone in the United Arab Emirates, were full. Fuchaira Petroleum Industrial Zone is an important refueling and oil inventory center in the Middle East.

"with the support of the extreme floating storage economy, shipowners can leave their ships idle for six to 12 months at a very attractive rate," broker Fearnley Securities said in a report this week.

"We will not rule out the possibility that 100-200 supertankers will be leased in the next 6-12 months."

In addition, Hugo De Stoop, chief executive of Euronav (EUAV.BR), Europe's leading tanker operator, said the number of cruise ships in the global supertanker fleet that could be used for offshore oil storage would depend on rates.

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