Floating Storage Picks Up

 

Information about the ships reveals that about every third vessel on charter contract earlier this year is now being used for floating storage. Most of the Arabian Gulf, but also some of Singapore, West Africa and the Mediterranean.

 

Ever since the dramatic decline in oil prices, which started in the second half of 2014, charterers and ship owners alike have been eying the forward oil market. 

 

The goal was to determine at what point the contango in the oil market was going to be high enough to make storing crude on tankers commercially viable. This happened at the end of 2014 and in short succession (first) traders and (later) oil companies took some 30 VLCCs on time charter for periods up to 12 months. 

 

However, as oil prices bounced back the forward curve flattened. At the same time tanker rates strengthened and it appears that storage economics quickly deteriorated. As a result very few vessels were actually utilized for floating storage. Most vessels ended up being actively traded in the spot market. 

 

Vessel tracking information reveals that about a third of the vessels taken on time charter earlier in the year are now used for floating storage. Most of them are stationed in the Arabian Gulf, while several others are anchored outside Singapore, in West Africa and the Mediterranean.

 

It is difficult to speculate why certain charterers engage in floating storage at this point, but it is clear that it does provide additional support for the large tanker market.