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Floating oil storage to remain out of reach in 2016: Clarksons

Tuesday, January 19, 2016 - 19:35

[AMSTERDAM] Traders looking to use supertankers to store oil as the physical excess grows are in for disappointment again in 2016, according to one of the world's top shipbrokers, as Iran's return to world markets keeps vessel prices elevated.

Iran's sanctions-free exports will increase demand for ships to ferry oil around the world, said Simon Chattrabhuti, head of tanker market analysis with Clarksons Platou Shipbroking, making it too expensive to store oil on the vessels.

With Iran returning to the market, "people are expecting strong demand for the vessels", Chattrabhuti said at the Platts Storage Conference in Amsterdam, adding "you can't anticipate that there are going to be a lot of cheap VLCCs out there".

Record-high freight rates in 2015 frustrated the efforts of most traders who sought to house millions of barrels of unsold crude on supertankers, so-called "very large crude carriers", which can hold as many as a million barrels of oil.

In 2015, the global excess of oil drove tanker rates higher, surpassing US$100,000 per day in some cases, because the sheer amount of oil looking for outlets kept vessels busy.

Additionally, as oil sellers worldwide fought for buyers, voyage times for many of these vessels increased, keeping them tied up for longer and raising the cost of hiring them.

This kept most traders from taking out long-term charters to use supertankers for storage, as they did during the last deep price rout in 2009, despite fast-filling tanks in the in-demand hubs of Europe, the United States and Asia.

Chattrabhuti said that would continue in 2016, despite the expected delivery this year of as many as 45 new vessels - a boost of 20 percent on the current fleet.

"In 2016, it's still going to be pretty hard to get a long-term time charter rate to do floating storage." He added that while the same dynamics have thus far prevented the widespread use of smaller vessels to store middle distillates, such as jet fuel and diesel, brimming tanks in the Amsterdam-Rotterdam-Antwerp hub could leave some traders with no choice but to pay for vessels to use as storage. "It may end up being stored despite the tanker rates ... if it has nowhere to go".

The International Energy Agency, in a monthly report on Tuesday, said the market "could see floating storage become profitable".

REUTERS