Demand to Store a Glut of Diesel at Sea is Rising Fast
Big oil traders are rushing to book tankers with a view to storing a glut of refined petroleum like diesel and jet fuel on the world’s oceans.
The interest in floating storage of fuels, one of the clearest signs of oversupply, will be viewed with concern by many of the world’s oil refiners — especially those in Europe — who are dealing with the worst market in years for the two products because of the negative effect the coronavirus has had on demand.....MORE
Deeper Curve
Torm A/S, the world’s fifth largest owner of oil-products tankers, says inquiries for storage are increasing, while firms analyzing tanker movements say the amount of fuel being held at sea is rising. Glencore Plc, Vitol Group and Mabanaft Group booked tankers to store fuels. Trafigura Group hired about 12 supertankers with a view to possible storage last week. Most were for crude but some were for fuels.
“European demand is being weighed on by the threat of a second wave of Covid-19 across the continent,” said Jay Maroo, senior market analyst at Vortexa Ltd. “Interest for diesel floating storage looks set to rise.”
Covid Resurgence
The bookings come amid a resurgence in the number of new coronavirus cases which the International Energy Agency and OPEC expect will hit oil demand, serving as a reminder of chronic oversupply that led to traders storing millions of barrels of excess crude and fuels on tankers earlier in the year.
Torm says that interest in floating storage has centered on holding diesel in northwest Europe, and has the potential to tie up ships and support freight rates for vessels that would otherwise be competing to transport cargoes.
Likewise, tanker tracking data suggest some of the storage may well take place in northwest Europe. At least three U.S. diesel cargoes have been transferred to tankers floating in the North Sea this month instead of discharging into shore tanks.
Stockpiles of diesel-type fuel in land-based independent storage in Europe’s Amsterdam-Rotterdam-Antwerp trading hub have risen sharply in recent weeks to the highest in 13 months, according to Insights Global data. At the same time, inventories of distillate fuels including diesel in the U.S. Gulf are seasonally at their highest level since at least 1991, according to the Energy Information Administration....
