Frontline Surges Amid Signs of Oil Storage at Sea. We hope that the risk of fires or explosions will not increase due to long-term oil storage at sea.
VLCC “Front Page”. Photo courtesy Frontline Ltd.
(Bloomberg) — Frontline Ltd., the oil tanker company led by billionaire John Fredriksen, surged in Oslo trading amid speculation that a plunge in crude prices is spurring demand for the vessels to store cargoes.
The company’s shares advanced as much as 13 percent, or 3.3 kroner, and were up 8.8 percent to 28.5 kroner ($3.72) at 1:30 p.m. in the city. Traders may park as much as 60 million barrels of oil on tankers in the coming months, according to JBC Energy GmbH, a Vienna-based consulting firm that advises governments.
Crude oil plunged 48 percent last year amid an oversupply that Qatar estimates at 2 million barrels a day, or about 6.7 percent of OPEC’s output. The decline helped deepen what’s called contango, where oil prices for later this year are above those now. When that gap gets wide enough, it can reward traders to purchase cargoes now, store them, and lock in the sale price on futures markets.
“It looks more and more likely that you’ll see more floating storage and it’s going to be good,” Eirik Haavaldsen, a shipping analyst at Pareto Securities SA in Oslo, said by phone. “The re-emergence of floating storage is what could move the crude tanker market this year from being rather good to possibly very very good.”
Frontline’s shares have gained 47 percent this week, valuing the company at 3.2 billion kroner. They fell as low as 7.5 kroner in September.
Very large crude carriers will earn an average of $35,000 a day this year, according to the average of six analysts estimates compiled by Bloomberg in December. That would be the most since 2010, data from Clarkson Plc show. The firm is the world’s largest shipbroker.
Copyright 2015 Bloomberg.
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Tehran storing 35 million barrels of crude oil on 18 tankers at sea Iran struggling to find buyers for some heavier crudes
Oil exports are the country’s key revenue earner and trade sources have said Iran is looking to store increasing amounts of crude at sea as stocks build up.
Gibson said Iran was estimated to be using 17 very large crude carriers (VLCCs) and one suezmax to store the oil in the Middle East Gulf area, which “equates to a staggering 35 million barrels of oil, or around 10 days of total national production”.
Gibson told Reuters in February Iran was storing crude oil on four VLCCs.
A VLCC can store up to 2 million barrels of crude while a suezmax can hold up to 1 million barrels.
“Iran has been struggling to find buyers for certain of their heavier crudes, which have been facing increasing competition at the same time that its Asian refinery customers are engaging in seasonal refinery maintenance,” Gibson said in a report.
Iran is OPEC’s second-largest oil producer and some of its major customers have said they will cut their imports.
“Unwilling to greatly slow production, and without onshore storage for the oil produced at its offshore Soroush and Nowruz oilfields, Iran has used more and more of their own fleet to store ‘surplus’ supplies,” Gibson said.
“How long the Iranian storage will go on is unclear, history would indicate that it will be drawn down during the third quarter as refinery capacity will have come back onstream and oil demand rises.”
Pressure
This development coincides with seasonally lower crude demand because of refinery maintenance, while pressure from the West on Iran intensifies over its nuclear programme.
Gibson’s estimate is in line with shipping sources who have told Reuters Iran is using 17 to 20 tankers to store crude.
The rise in storage by Iran has pushed the total volume of crude oil held on tankers globally higher.
“Crude storage was stable at around 55-65 million barrels between July 2009 and early March 2010. Moreover, March and April have seen large gains with 81 million barrels now being stored,” Gibson said.
Brokers said a market price structure known as contango, where prompt oil is cheaper than forward prices, was beginning to make it more attractive to store crude on tankers, encouraging speculative trading plays.
“Part of the drive for floating storage is attributable to oil traders taking advantage of the reappearance of a contango in over the past few weeks,” Morgan Stanley said in a report.
Broker ICAP Shipping said on Friday the volume of crude oil held on tankers at sea globally had risen to 31 million barrels from an estimated 27 million barrels a week ago.
“Storage continues to play a crucial role in the health of both the clean and crude tanker markets,” Gibson said.
Gibson said clean oil products, mostly gasoil, held in floating storage had fallen more than 60 percent to 40 million barrels from close to 100 million barrels at a peak last year.
“Recent storage fixtures to absorb surplus jet fuel, resulting from the flights grounded by Icelandic volcanic ash, have done little to stem this decline,” Gibson said.