Poten & Partners: Utilization of VLCCs for Storage on the Rise

More vessels are being used to store crude oil based on a recent report by Poten & Partners covering the last 4-6 weeks.

The trend has emerged countering the traditional economics that do not seem to support it at this point in time.

Since early April, crude oil prices have rebounded from their multi-year lows reached earlier this year (Brent is currently priced at around USD 65-67/bbl, almost 50% higher than the price of USD 45/bbl in mid-January).

At the same time,the twelve month Brent spread (the difference between today’s spot price and the forward price 12 months from now) has been on a declining trend since reaching a high of USD 10.48 during the week of January 9th 2015.

Last week, this spread was down to USD 4.27. Using this metric, floating storage is getting less economical by the day, the report shows.

“Surprisingly enough though, it appears that the utilization of VLCCs for floating storage has increased in recent weeks,” the report added.

Even though a significant number of the VLCCs anchored in the Arabian Gulf for the last several weeks were not storing crude but waiting to load at Basra oil terminal in Iraq, outside the Iraqi situation, more vessels are being utilized for floating storage.

According to Poten, the vessel tracking information reveals that about a third of the vessels taken on time charter earlier in the year are now used for floating storage.

“Most of them are stationed in the Arabian Gulf, while several others are anchored outside Singapore, in West Africa and the Mediterranean,” the report further added.

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