Oil Traders Hiring Old Supertankers for Long-Term Floating Storage

by Ship & Bunker News Team
Monday January 12, 2015

Some of the world's largest oil traders have been taking advantage of the collapse in oil prices by hiring older supertankers as floating storage, keeping excess crude at sea until prices recover, reports Reuters. 

Companies such as Vitol Group, Trafigura Beheer BV, and Royal Dutch Shell plc have reportedly been able to hire VLCC's for around $40,000 per day, well below current VLCC spot rates that are at their highest point in five years. 

The vessels are purportedly older and less fuel-efficient, with many of the contracts lasting up to 12 months.

"In 2009 freight rates were extremely low and owners were willing to put their ships out on charter in order to mitigate weak spot rates," said Christian Waldegrave, a marine market analyst with Teekay.

"In a rising freight market, such as we are in now, I would think that owners would be more hesitant to fix out their ships on time charter unless they felt strongly that rates were about to decline."

According to analysts at JBC Energy, the practice of floating storage may even be a boon for oil prices in the short term. 

"This will not only release some pressure on front-end prices, but also allow for the physical market to clear somewhat," said the oil and gas research centre. 

Last week oil shipping company Frontline Ltd.  also predicted earlier that VLCCs would see continued demand and solid freight rates due to floating storage. 

Ship & Bunker News Team
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