Tanker Market is Awash (Again) in Floating Storage Chatter

Remember floating storage? It’s back. Or at least, back in the spotlight. Market chatter has refocused on the view that falling oil demand equals higher tanker storage equals fewer ships available for spot deals equals higher spot rates.

Spot rates are definitely rising, albeit off an extremely low base. On Monday, Clarksons Platou Securities put spot rates for very large crude carriers (VLCCs; tankers that carry 2 million barrels of crude oil) at $27,900 per day, up 124% week-on-week.

VLCC rates have essentially gone from very bad back to just plain bad. From below “opex” levels, where owners took in less than they were paying out for crew and other expenses, to “cash breakeven,” where owners scrape by and cover debt and operating costs.

Crude-tanker stocks — which are performing very poorly in 2020 — are rebounding off very depressed levels. The stock price of of DHT (NYSE: DHT) is up 12% over the past week. Teekay Tankers (NYSE: TNK) is up 11%. International Seaways (NYSE: INSW) rose 10% and Euronav (NYSE: EURN) 9%. Frontline (NYSE: FRO) and Nordic American Tankers (NYSE: NAT) gained 7%.

This time it’s different
If the market returns to floating storage, version 2.0 will be different. Most of the crude oil loaded on tankers during floating storage 1.0 is still on the water. Much of it is now sitting offshore of Asian terminals.

New data provided to FreightWaves by Kpler shows that the volume of crude lingering offshore of China (aboard ships idle 12 or more days) is still 67 million barrels. This is not far below the high of 75 million barrels. China volumes now represent 53% of the global total. Total idled crude at sea is still 127 million barrels. This is down 30% from the July 4 peak but still very high…

floating storage chart
Chart data: Kpler


 


View entirety: Freightwaves