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Oil Traders Seek +10 Crude Supertankers Storage

Home Forums Refining Community Refinery News Fw: Venezuela OPEC crude cuts US/China 189MBD – non-event? Oil Traders Seek +10 Crude Supertankers Storage

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Charles Randall
Participant

Oil Traders Seek Another 10 Tankers for Storage, Frontline Says

By Alaric Nightingale
     Jan. 7, 2009 (Bloomberg)
— Frontline Ltd., the worlds biggest
owner of supertankers, said oil traders want to charter as many
as 10 vessels to stockpile crude to take advantage of higher
prices later in the year.
     About 25 supertankers were already hired for storage and
there are enquiries for 5 to 10 more, Jens Martin Jensen
,
Singapore-based interim chief executive officer of the companys
management unit, said by phone today.
     The traders would buy crude now and sell it for delivery
later, profiting from a futures market situation called contango
where prices are higher as the year progresses. The vessels could
handle as much as 20 million barrels
, or about what is produced
by OPEC member Algeria in 15 days. They would add to as much as
50 million barrels already hoarded at sea, for a combined amount
equal to almost five days of European Union demand
.
     Ive never before seen storage demand on this scale,
said Didier Labat, a Paris-based shipbroker at Barry Rogliano
Salles who has worked in tanker markets for about 20 years.
     Commodities prices fell the most in five decades last year,
with crude dropping more than $100 from the peak of $147.27 a
barrel in July, as simultaneous recessions hit the U.S., Europe
and Japan. Oil demand in 2008 fell for the first time since 1983
,
according to the Paris-based International Energy Agency.
     Thirty-five supertankers represent about 7 percent of the
global fleet of very large crude carriers
, according to data from
London-based Drewry Shipping Consultants Ltd. Storing oil in
tankers may buoy rental rates that fell by a record 78 percent
last year as slower economic growth sapped demand for energy.

                          Financing Costs

     Traders are seeking to lease ships for three to nine months,
Jensen said. Crude oil for December delivery traded at $61.90 a
barrel as of 10:49 a.m. in London, $13.66 more than the February
contract. Oil companies and traders may be able to profit from
storing the oil, assuming shipping, insurance and financing costs
are covered.
     A supertanker would cost about 90 cents a barrel a month for
storage depending on the length of the rental, according to data
last month from shipbroker Galbraiths Ltd.
     Iran, the second-largest member of the Organization of
Petroleum Exporting Countries after Saudi Arabia, idled as many
as 15 of its biggest ships in May to store crude oil.
That
contributed to three consecutive months of higher rental rates
for ships.
     The cost of delivering Middle East oil to Asia, the worlds
busiest route for supertankers, rose yesterday for the first time
since Dec. 5, according to the Baltic Exchange in London.
     Forward freight agreements advanced. The derivatives are
used by traders to bet on the future price of hauling Saudi
Arabian cargoes to Japan, an industry benchmark.

                        Derivatives Advance

     The contracts traded at about 46 Worldscale points for the
fourth quarter, according to prices from Oslo-based broker Imarex
ASA as of 10:34 a.m. London time.
They closed at 45 yesterday.
     Worldscale points are a percentage of a nominal rate for
more than 320,000 specific routes. They give owners and oil
companies a starting point for negotiating hire rates without
having to calculate the value of each deal from scratch
.
     Frontline, based in Bermuda, has advanced 13 percent in Oslo
trading this year. The five-member Bloomberg Tanker Index has
gained 12 percent.
     EU oil consumption averaged 14.86 million barrels a day in
2007, according to data from BP Plc.

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