Oil major BP has provisionally chartered a supertanker to store crude oil off Malaysia at this year’s lowest rate yet, according to industry sources and data on Refinitiv Eikon.

The charter is the latest in a flurry of ship bookings made by oil majors and trading houses after tanker rates plunged. A resurgence in coronavirus cases, poor weather and the end of the northern hemisphere’s summer driving season have slowed global oil trade and shipping demand.

BP chartered very large crude carrier (VLCC) Gene at $20,500 per day for three months and has the option to extend another three months at $22,000 per day, one of the sources said.

“It is the cheapest rate so far,” he said.

BP declined to comment. The sources declined to be named as they are not authorized to speak to media.

The tanker is expected to arrive at Linggi port on the west coast of peninsular Malaysia later on Thursday, data on Refinitiv Eikon showed.

The daily rate for chartering VLCCs for six months hit a high of $120,000-$130,000 in April as traders rushed to store oil for later sales after a collapse in oil prices and demand in the second quarter. More than 1 billion barrels of oil entered storage over the second and third quarter.

The trading strategy, known as a contango play, relies on a wide spread between prompt and future months to cover storage costs.

Such storage plays are starting to look “marginally open”, a Singapore-based crude trader said.

However, Citi analysts said: “Much of the recent temptation to lease vessels for storage reflects more the decline in freight rates than a return to super contango.”

Ashok Sharma, managing director of Singapore-based shipbroker BRS Baxi, said the leases are more like replacing “expensive tonnage chartered earlier in the year … with cheaper tonnage.”

[reuters]