Product tanker owner and operator Torm has assessed that 12% of the clean trading product tanker fleet is working in storage and 90% is in ’logistical storage’
Torm chief executive officer Jacob Meldgaard noted this is an unprecedented scenario: approximately three times higher than average.
The Saudi Arabian response to the collapse of the OPEC talks on reducing crude oil production is well documented, as is the drop in demand from the Covid-19 coronavirus pandemic. The result was the 90% plus drop in the crude oil price and a rush by traders to book all available storage, including tankers, based on the attractive price contango.
This resulted in a surge in demand for storing crude oil and refined oil products. “I have been working in shipping almost 30 years and I have never experienced so many major drivers affecting the market as we have so far seen in 2020,” said Mr Meldgaard during a Marine Money webinar on 27 May.
Regarding the impact on the product tanker fleet, Torm has assessed that 12% of the clean trading product tanker fleet is now operating in storage. Torm defines storage as a vessel that has cargo on board that has been idle for six to seven days. The idle fleet breakdown of storage was noted as:
An important factor is the nature of the storage. Torm estimates that 10% of the storage fleet is in the contango play, while as much as 90% of the product tanker storage activity is ’logistical storage’. This means the vessels are unable to discharge the cargo. “We recently deviated a vessel which had loaded on the US west coast for initial discharge on the west coast of Mexico. That vessel was deviated to Australia, increasing the tonne-mile of that voyage by almost four times,” said Mr Meldgaard.
In these situations, it will be important for owners and operators to examine their charterparties – is the tanker on demurrage?
Mr Meldgaard also noted that in locations that are coming out of Covid-19 coronavirus lockdown, demand is returning. In China, where the lockdown caused a complete collapse in demand, the latest figures for April 2020 indicate that demand for oil products was 1% higher year-on-year. This is a glimmer of hope that there will be a rapid if patchy drawdown of floating inventories as the market starts to normalise.
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