Oil’s plunge has revived memories of the 2008-09 recession, when traders snapped up dozens of tankers to park unwanted barrels at sea.
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’s participation in a pact to limit global supply.
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.....MUCH MORE
“The oil curve has moved in to contango or carry, prompting oil traders and majors to request offers for storage,” said Robert Hvide Macleod, the chief executive officer of Frontline Management, which runs the fleet of one of the world’s largest tanker companies. “How much actually gets done, the next few days will show.”
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 — about $30,000 for an older supertanker — would work out at about $2.7 million, even if there are significant additional costs involved in booking a vessel.
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%.
Traders and shipbrokers said that owners were reticent about accepting multi-month storage charters and that the number of suitable vessels available was limited. Ships can lose trader approvals if they’re stationary for long periods, and their hulls can need cleaning after long-periods without moving....
See also this morning's "Oil Tanker Owners Frontline and Euronav Both Up 10% on the Day (EURN; FRO)"
