Very large crude carrier (VLCC) floating storage has witnessed a substantial drop impacted by an agreement on Iranian nuclear developments and OPEC production cuts.
While Iranian nuclear sanctions were in place, a significant portion of National Iranian Tanker Company’s (NITC) VLCC fleet was used for storage of Iranian crude and condensate, according to a report from Gibson Shipbrokers.
From early 2015, the tanker industry also witnessed a gradual increase in VLCCs employed for non-Iranian floating storage. The number of VLCCs absent from the trading market was further boosted by tonnage in other non-trading activities, primarily fuel oil storage around the Singapore area.
Hence, the number of tankers absent from trading operations peaked in 2016, fluctuating between 50 to 60 units for most of the year.
However, with the international agreement reached about the Iranian nuclear developments, the floating storage saw a rapid release of the NITC tankers in late 2016/early 2017. This was to a large extent offset by robust demand for non-Iranian storage, aided by declining freight rates and persistently high land based oil inventories through the first half of 2017.
A further drop in floating storage was seen last month, as the OPEC led production cuts have finally started to bite. The total number of non-trading units fell to just 34 by the end of August, the lowest level since December 2014.
The number of VLCCs in non-Iranian floating storage declined by 10, while a further 2 VLCCs were released from the Iranian floating storage.
Inevitably, the decline in VLCC floating storage is a bearish development from an owners’ perspective as it boosts the trading fleet.
However, many units that have been recently released from floating storage, or are still on storage, are of vintage age and it may prove difficult for them to find trading opportunities.
“Whether they will find further storage employment, resume trading or simply leave the market for good – that remains to be seen,” Gibson concluded.