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[SINGAPORE] Two trading houses have chartered supertankers to store oil off Singapore, taking advantage of cheap freight and crude, and as refinery maintenance crimps demand.
Clearlake, a subsidiary Gunvor, has chartered the 308,596 deadweight tonne (dwt) Very Large Crude Carrier (VLCC) Arenza XXVII at US$33,000 per day for one to four months, a Singapore-based shipbroker said. VLCCs can hold up to 2 million barrels.
ST Shipping, Glencore's shipping arm, booked the 300,133 dwt Plata Glory, another VLCC, for a month at US$22,000 a day and has the option to extend at US$26,000 and US$29,000 per day for the second and third month, brokers said. Both companies do not comment on commercial operations.
The moves come as traders take advantage of a contango, in which prices for delivery at a later stage are higher than those for delivery on the spot.
After months of rising prices, spot Brent crude futures fell back below US$50 per barrel last week after Britain's shock vote to leave the European Union just as a refined product glut threatens to erode crude demand in Asia.
However, prices for delivery towards the end of the year remain above US$51.
"Traders are trying to bottom-fish (for crude bargains) and store for one to two months before re-selling," a trader with a western firm said.
At the same time, it has become cheaper to charter tankers, making it potentially attractive to store oil for a later sale.
Rates for a one-year VLCC charter have fallen by almost US$20,000 since January, to between US$38,000 and US$42,000 a day last week, according to shipping services firm Clarkson. They were US$47,500 per day a year ago.
The Plata Glory is anchored off Sungai Linggi, Malaysia, while Arenza XXVII is moored in the Johor anchorage, also Malaysia, according to shipping data in Thomson Reuters Eikon. Both tankers are currently empty.
Traders said that Russian Espo and Abu Dhabi's Murban crudes are the most likely fuels to be stored.
The storage play also comes as refiners plan to shut for maintenance, crimping demand.
About 1 million barrels a day of processing capacity in Asia will be shut in October, according to Reuters calculations, leaving crude cargoes for loading in August unsold.
Still, the current contango structure is tight, making it risky to hold oil for long, traders said.
Previously, the number of tankers used for oil storage around Singapore fell to 30 this month from 40 in May, data from Thomson Reuters Supply Chain & Commodities Research showed, as price rises between January and June triggered sales of stored oil.