Freight rates for very large crude carriers (VLCCs), which were supported this week by a shift to using older vessels for floating oil storage, have plateaued at current levels but could nudge higher on further storage plays, brokers said.
Rates from the Middle East to Asia are currently around 50 on the Worldscale measure and W55 from West Africa to Asia depending on vessel age and actual destination, brokers said.
“Rates haven’t peaked, they have plateaued,” said Ashok Sharma, managing director of shipbroker BRS Baxi in Singapore.
“Depending how the storage play plays out rates could touch W60 – not next week. It could take two or three weeks to manifest itself,” Sharma told Reuters.
Traders are increasingly storing oil in ageing supertankers in Southeast Asia as they grapple with a supply overhang that has left the system clogged with unneeded fuel despite an OPEC-led drive to cut production to prop up prices.
A raft of cargoes from West Africa to China buoyed rates for modern vessels.
“West Africa is supporting the market partly thanks to Chevron and its tough ship safety vetting scheme that favours modern vessels,” a European supertanker broker said.
Traders and oil majors have chartered around 10 VLCCs, which can each hold 2 million barrels of oil, for short-term oil storage around Singapore.
They include ST Shipping, Glencore’s marine transportation arm, which chartered the 301,438 deadweight tonne (DWT) 1999-built VLCC Ashna on Wednesday for short-term storage, brokers said.
These ships are in addition to about 35 supertankers deployed on long term storage, brokers said.
Supertankers are also being used for floating storage off South Korea, Japan, China and in the North Sea, the European supertanker said. He added estimates suggest 94 million-100 million barrels is being held on vessels offshore globally.
Brokers said storage had become viable again on the back of low oil prices and cheaper tanker hire rates. “If storage actually plays out 10-15 ships might be added to those currently on short-term charter,” Sharma said.
Current charter rates are about $16,000-$20,000 a day for hire periods of between 30 days to six months. Charterers are willing to pay up to about $21,000 a day for 30-60 days.
“For an owner $21,000 a day on time charter is far, far superior to earning $21,000 a day on the spot market,” Sharma said.
“The money comes to you upfront – 15-30 days in advance. There are no fuel or port costs on the owner’s account, which can total $1.2 million for a voyage from the Middle East to China. Storage is a good option for older tonnage since there is less machinery running and the crew can catch up on maintenance,” he added.
That came as charterers are drip feeding crude cargoes from the Middle East with brokers reporting just 12 charters fixed so far to load in the first 10 days of July.
About 115-120 cargoes were fixed for June loading, an average month, compared with the 124 cargoes fixed in May.
VLCC rates on the Middle East-to-Japan route fell to W49.5 on Thursday from around W51 a week earlier.
Rates on the West Africa-to-China route dipped to about W55.25 on Thursday against W55.75 a week earlier.
Charter rates for an 80,000-dwt Aframax tanker from Southeast Asia to East Coast Australia eased to around W102 on Thursday compared with around W102.25 last week.