collapsed<\/a> as much as 32% on Monday after Saudi Arabia began offering its crude at deep discounts, stoking immediate concerns of an oil-price war. On Friday, the kingdom and its allies in OPEC failed to secure Russia\u2019s participation in a pact to limit global supply.<\/p>\n<\/p>\n
The rout has raised the prospect of traders keeping oil at sea for later sale at a profit. In the height of the 2008-09 recession, oil companies, traders and financial institutions kept more than 100 million barrels on tankers, some betting on a rebound, others simply locking in a contango, where month-on-month price oil-price gaps far exceeded the cost of hiring vessels.<\/p>\n
<\/p>\n
\u201cThe oil curve has moved in to contango or carry, prompting oil traders and majors to request offers for storage,\u201d said Robert Hvide Macleod, the chief executive officer of Frontline Management, which runs the fleet of one of the world\u2019s largest tanker companies. \u201cHow much actually gets done, the next few days will show.\u201d<\/p>\n
<\/p>\n
Brent futures for May were down 18% at $36.90 a barrel at 10:18 a.m. in New York. Contracts for August were almost $2 a barrel higher, equating to a difference of nearly $4 million for a 2 million-barrel supertanker cargo between the two months. Current day rates for a three-month charter \u2014 about $30,000 for an older supertanker \u2014 would work out at about $2.7 million, even if there are significant additional costs involved in booking a vessel.<\/p>\n
<\/p>\n
Share prices of some of the companies exposed to storing crude rallied. Frontline rose as much as 13.3% in Oslo, while fellow tanker owners Euronav NV and DHT Holdings Inc were both up as much as 6.3%. Dutch Royal Vopak NV, which owns on-land storage terminals jumped 6.4%.<\/p>\n
<\/p>\n
Traders and shipbrokers said that owners were reticent about accepting\u00a0multi-month storage charters and that the number of suitable vessels available was limited. Ships can lose trader approvals if they\u2019re stationary for long periods, and their hulls can need cleaning after long-periods without moving.<\/p>\n
<\/p>\n
DHT Holdings, another owner, has seen \u201cseveral inquiries\u201d about the use of tankers for floating storage, co-CEO Svein Moxnes Harfjeld said by email.<\/p>\n
<\/p>\n
\u201cA number of oil companies are already looking to time charter or purchase older VLCCs to use as floating storage units,\u201d said Henry Curra, head of research at Braemar ACM Shipbroking, referring to very large crude carriers that typically haul 2 million-barrel cargoes.<\/p>\n
<\/p>\n
Interest has also begun to kick in for onshore storage in the Caribbean and the U.S., where crude inventory levels are below the five-year average at 444 million barrels.<\/p>\n
<\/p>\n
\u201cWe had a significant number of inquiries from people looking for storage in the U.S.,\u201d Ernie Barsamian, CEO of The Tank Tiger, a terminal storage clearinghouse, said by telephone. \u201cWe\u2019ve been receiving inquiries for Caribbean storage which, prior to this weekend, were fairly sparse.\u201d<\/p>\n
<\/p>\n
The contango is starting to make sense for onshore storage opportunities, given the cheap price for oil and overall lower carrying costs, he said. Before the coronavirus outbreak and the breakdown of OPEC+ talks, storage rates for a 6-month period for some terminals in the Cushing, Oklahoma, storage hub were about 20 cents a barrel, according to Barsamian. Export tanks in the U.S. Gulf Coast were going for around 65 cents a barrel.<\/p>\n
<\/p>\n
In the Caribbean, storage rates are near 35 cents, Barsamian said, noting that those terminals have not been full for a while.<\/p>\n
<\/p>\n
Ursa Space Systems, an industry data provider, has Caribbean crude inventories at almost 35 million barrels, or just 35% of available capacity, according to Geoffrey Craig, an energy analyst for the company.<\/p>\n
<\/p>\n
On Friday, Saudi Arabia-led OPEC failed to agree with allied producers including Russia on supply curbs to avoid a glut. The Organization of Petroleum Exporting Countries had proposed a 1.5 million barrel a day reduction, but failed to get Russia\u2019s participation. On Saturday, Saudi Arabia began offering its barrels at deep discounts to benchmarks, triggering speculation a price war has begun.<\/p>\n
<\/p>\n
\u201cTraders are asking a lot of questions this morning\u201d about booking tankers to keep crude at sea, said Halvor Ellefsen, a London-based shipbroker at Fearnleys A\/S, echoing comments from several traders and brokers. \u201cAt the moment, it\u2019s opportunistic: they know they may well need the capacity to store barrels.\u201d(Updates prices in fifth paragraph and details on U.S. and Caribbean activity starting in tenth paragraph)<\/p>\n
<\/p>\n
\u2013With assistance from\u00a0Jack Wittels\u00a0and\u00a0Fred Pals.<\/p>\n
gCaptain<\/p>\n","protected":false},"excerpt":{"rendered":"
Brent futures for May collapsed as much as 32% on Monday after Saudi Arabia began offering its crude at deep discounts, stoking immediate concerns of an oil-price war. On Friday, the kingdom and its allies in OPEC failed to secure Russia\u2019s participation in a pact to limit global supply. The rout has raised the prospect …<\/p>\n","protected":false},"author":1,"featured_media":5954,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[56],"tags":[3038,3039,166,2494,3037,198,3036,2222],"class_list":["post-5953","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-marine-world","tag-augurs","tag-glut","tag-oil","tag-price","tag-store","tag-tankers","tag-wanted","tag-war"],"_links":{"self":[{"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/posts\/5953","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/comments?post=5953"}],"version-history":[{"count":0,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/posts\/5953\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/media\/5954"}],"wp:attachment":[{"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/media?parent=5953"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/categories?post=5953"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.al-sindbad.net\/rest\/wp\/v2\/tags?post=5953"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}