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Tom Kirkman

Ships Turn Into Floating Storage Units for Oil and Gas as Chinese Buyers Back Out

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Satellite imaging won't help in tracking the amount of floating storage for the current glut of oil & gas.  This will likely be a big money loser for the stranded, floating storage.  Looks like this oil & gas glut is going to stick around for quite a while.

WSJ: Ships Turn Into Floating Storage Units for Oil and Gas as Chinese Buyers Back Out

As the coronavirus outbreak spreads, shippers are warehousing an increasing amount of fuel on the high seas

A new glut of oil and gas is emerging, floating at sea, as the novel coronavirus epidemic cuts China’s appetite for fuel and hampers work at Chinese ports.

Dozens of ships are acting as floating storage vats for oil and liquefied natural gas because the owners of the fuel are unable to find buyers or places to store their cargo on land, according to traders, shipping brokers and analysts.

Some 79 vessels were storing crude and condensates at sea on Tuesday, according to ship-tracking firm Kpler, up from 64 a year ago.

Traders often load up ships with crude oil or gas with no immediate intention of moving the cargo around the world, seeking to profit by buying fuel on the cheap and locking in a higher price in the future.  ...


... The current situation is different for the roughly 87 million barrels of crude and condensates stored on the high seas today. Rather than getting paid to store oil and gas in ships, many traders simply can’t find a home for their cargo.

“Right now, the economics don’t call for an increase in storage,” said Giovanni Serio, head of research at oil-trading giant Vitol Group, who added that Brent crude costs almost as much in the spot market as it does in the futures market.

One carrier loaded with crude was heading toward China when the refinery that bought the oil tried to resell it to South Korea and Japan, said Erik Broekhuizen of Poten & Partners Inc., the New York brokerage that arranged the cargo. The refinery had purchased the crude before the virus shut down swaths of China’s economy and prompted refineries to reduce the amount of oil they processed.

The refinery’s attempt to resell the cargo in recent weeks failed as the virus spread to other countries in East Asia.

“All those deals are falling through because demand is falling everywhere,” Mr. Broekhuizen said, adding that the epidemic is the most disruptive event he has experienced in three decades in the shipping industry. “It is not a local event any more.”  ...


... “There are quite a number of vessels out there waiting to discharge,” said Igho Sanomi, chairman of Taleveras Group, a Nigerian oil-trading company. “We’re also keeping our ears down to see if some of the Chinese refiners are going to declare a force majeure, which for some of these vessels would have been a catastrophe.”

Storing oil at sea comes with costs for traders and owners. Brent-crude prices have tumbled 20% in 2020, to $52.82 a barrel. And disruption at Chinese ports has pushed several oil carriers into demurrage, which is when the trading company that chartered the vessel fails to unload it in time and pays a charge to the shipowner, said Vitol’s Mr. Serio.  ...



P.S. anyone running into trouble with reading this WSJ article?   How to Get Around Newspaper Paywalls in 2020

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