Tankers sail in figure eights

reported tanker locations

Not everyone associated with the oil industry is losing these days. As the enormous ships sail in figure eights around the globe, the tanker companies are reaping the rewards, making as much as $70,000 a day, if not more, for their services.

 Such is the state of the oil industry these days that there is sometimes nowhere to put the oil. Off the coast of Texas, a line of roughly 40 tankers has formed, waiting to unload their crude or, in some cases, for a willing buyer to come along. Similar scenes are playing out off the coasts of Singapore and China and in the Persian Gulf.

[June 5 floating storage: low crude steep contango]

50 million barrels of crude were added to floating storage globally since January,   According to Iranian officials, the country's approximate 50 million barrels stored at sea is mostly condensate and fuel oil, and not crude as some traders fear.   Ccondensate condenses out of the natural  gas if the temperature is reduced to below the hydrocarbon dew point temperature of the raw gas.   Due to the steep contango in the forward curve, the investors best positioned to execute on a long oil trade are those who have the capacity to buy a few thousand barrels of oil, store it in their backyard, and sell it in a few months.  For everyone else, be prepared to pay handsomely for that storage.

[June 5 The fading contango: tankers used for floating storage.freed up as oil unloaded]

Physical oil is coming under pressure as trade houses unwind a profitable storage play after several months that saw them holding millions of barrels on tankers at sea.  Charterers made fresh efforts to get rates below the psychological mark of w60 Worldscale rates for VLCCs on the Persian Gulf to East routes, The key PG-Japan rate was assessed unchanged at w59.. The market is very volatile and if there are one or two replacement or date sensitive cargoes, they push up the rates,

[earlier]

Freight rates for dirty tankers in the East of Suez market have gone up sharply to hit their highest level so far in 2015 lately, amid strong demand to move crude and fuel oil and spike in interest for floating storage.   The long waiting time in Basrah for ships to load and delays in discharging at South Korea and China due to logistics and weather issues also reduced tonnage supply, contributing to firming rates.

[May 13 ]
More VLCCss were being used for storage over the last four – six weeks.   A third of the vessels taken on time charter earlier in the year are now used for floating storage. Most of these are in the Arabian Gulf, but there also some in Singapore, West Africa and the Mediterranean.

[April 24 tankers for crude storage]

Invalid locations?

As much as 90 percent of global oil storage capacity is “captive,” or controlled by major producers such as Royal Dutch Shell Plc, BP Plc or Chevron Corp. That means only a small part of land-based oil storage is available for independent traders to lease to exploit the market contango, which has prevailed since July.


Some of the world’s largest oil traders have moved to secure floating storage in tankers to take advantage of the market contango. Vitol, Koch Industries Inc., Shell and Trafigura Beheer BV, have booked tankers that could be used to store crude at sea for one-year charters, The last time the oil market moved into a significant contango during the global financial crisis of 2008 and 2009, traders stored 100 million barrels at sea.

[December 12 2014 ]
Seaborne oil trade will rise by 3.5 percent in 2015, against no change in the fleet,  83 very large crude carriers were bound for Chinese ports, at about 8:30 a.m. December 12in London. The ships would transport 166 million barrels, assuming standard cargoes, the largest number in data starting in October 2011. The cost of hiring the vessels surged to the highest in almost five years.   Part of the tanker freight-rate rally may be because of rising shipments from West Africa. Traders booked 33 cargoes of crude on VLCCs from the region this month, 43 percent more than a year earlier.

[October 29  Phantom Ships in the Northwest Passage]
To hide their crimes on the high-seas, hundreds of ships broadcast false identities by using transmitters taken from scrapped vessels on the black market and by typing in made-up ID numbers and hoping they don't arouse suspicion.    Fifteen percent of all ships transmitting fake identities are tankers, typically carrying oil or oil products.    Vessels smuggling oil shipments or other raw materials can lead to significant gaps in intelligence on supply and demand.    large shipping companies seeking to maintain market opaqueness, oil tankers circumventing international sanctions, and large oil producers concealing oil via floating storage in order to affect global oil prices. This group will likely be followed by far more ships seeking to conceal their information in the future.

The Northwest Passage is a sea route through the Arctic Ocean, along the northern coast of North America via waterways through the Canadian Arctic Archipelago, connecting the Atlantic and Pacific Oceans.

[May 9 2010 Sitting Ducks for pirates: idling tankers]

At least 15 VLCC crude carriers are idling in the Persian Gulf, Gulf of Oman and Gulf of Suez. The tankers can store a combined 30 million barrels of oil.

Traders store oil hoping to benefit from a so-called contango structure in futures markets, in which prompt prices are lower than contracts for later delivery. Traders can make money when the difference in prices is greater than the cost to charter the ship.

The contango between the front-month crude contract traded on the New York Mercantile Exchange and the second-month contract to the highest level since Dec. 15. Dirty products usually include crude oil and may include fuel oil.

The VLCC rate was $43,876 a day as of April 23, according to the London-based Baltic Exchange. The rate has more than doubled this year. VLCCs can carry about 2 million barrels of oil.


Iran, OPEC’s second-biggest oil producer, added three supertankers to its fleet of vessels storing crude, matching a similar program in 2008 that helped freight rates to triple, ship tracking data show.

Two years ago, Iran used as many as 15 tankers for storage, constricting vessel supply and helping to more than triple freight rates in less than three months.

Iran is likely storing oil because of weakening demand as refineries across Asia, accounting for almost two-thirds of global demand for supertankers, carry out maintenance. National Iranian Tanker Co., which operates the supertankers, also has a laden suezmax tanker idling off Iran, ship-tracking data show. A suezmax can hold about 1 million barrels of oil.

Iran sanctions notwithstanding, China loads crude at Karg Is.

Yuan yang hu

The Chinese-owned supertanker Yuan Yang Hu, with capacity to carry two million barrels of crude, called at Iran’s Kharg Island on March 20-21 and is en route to China, shipping tracking data showed.

The vessel is owned by Dalian Ocean, a subsidiary of state shipping giant China Ocean Shipping (Group) Company (Cosco).

Yuan yang hu

Ship Type: Crude oil tanker
Year Built: 2010
Length x Breadth: 330 m X 60 m
Gross Tonnage: 152727, DeadWeight: 297305 t
Speed recorded (Max / Average): 11.7 / 11.7 knots
Flag: China [CN] 
Call Sign: BQCH
IMO: 9398943, MMSI: 413880000

[January 31]

National Iranian Tanker Company (NITC) has for the first time chartered an Indian vessel covered under a scheme arranged by New Delhi through state-run insurers, sources said.

NITC has chartered the vessel the Omvati Prem, owned by Mumbai-based Indian shipper Mercator Ltd, and used it to carry an oil cargo that sailed from Iran in December for Indian refiner Mangalore Refinery and Petrochemicals Ltd., the sources said. The deal included cost, insurance and freight (CIF), they said.

India’s junior oil minister Panabaaka Lakshmi in a written reply to a question in parliament in November on the insurance scheme did not specify if Iran could charter vessels with Indian insurance cover for supplies.

Use of the scheme effectively transfers the liability for any damage or spill to India’s state-run insurers, and ultimately to New Delhi. When NITC uses its own vessels, the liability stays with its Iran-based insurer.

India established the scheme to keep some oil flowing after EU sanctions came into effect and disrupted shipping. The government arranged emergency cover that was meant for use by Indian flagged vessels chartered by local refiners.

There was little appetite for Indian shippers for the scheme as the insurance was limited to $50 million, a fraction of the $1 billion coverage that a supertanker would typically have from reinsurers against personal injury and pollution claims.

Mercator was the only company to use the scheme. Before NITC chartered the Omvati Prem, MRPL had used the vessel — which can carry about 635,000 barrels — to import Iranian crude.

MRPL is India’s biggest buyer of Iranian crude and did not charter the vessel for this voyage due to commercial and technical reasons, one source

Another shipping source privy to the deal said Omvati Prem discharged in Mangalore on Jan. 8. Mangalore Port’s website showed that the vessel arrived on Jan. 7.

NITC has struggled to keep the flow of oil going to India as it lacks vessels of small enough size to dock at India’s Mangalore port. One of the sources said NITC had chartered the Omvati Prem for about two months.

“Iran offered Mercator a better rate than MRPL, that’s why they have taken the risk of joining hands with NITC,” another shipping source said. “Mercator has taken a risk as NITC is a blacklisted company under sanctions.”

Mercator paid $26,105 for P&I cover to United India Insurance Company and 1,852,710 rupees ($34,000) for hull and machinery cover to The New India Assurance for a voyage between December 28 and January 27, documents seen by Reuters show.

Sources at the two insurance companies were not aware that Mercator had used the policy to deliver an Iranian cargo on a CIF basis.

Mercator did not respond to Reuters enquiries. MRPL, India’s shipping ministry, United India Insurance and The New Indian Assurance Co Ltd all declined to comment for the story.

D.K. Mittal, secretary for financial services at the finance ministry, and Syed Akbaruddin, spokesman at India’s foreign ministry, were not immediately available for comment.

India, along with Iran’s other major Asian clients including China and Japan, has won an exception to U.S. sanctions on financial institutions that process oil payments by reducing Iranian oil imports.

NITC was the target of fresh EU sanctions imposed in October and was declared by Washington to be an extension of the Iranian state in July 2012. That prevents U.S. companies from dealing with it.

NITC has changed many tanker names as it adopts new tactics to keep Iran’s oil exports flowing in response to sanctions.

China, India, Japan and South Korea are the top four buyers of Iranian crude and have all struggled to find ways around the shipping insurance ban.

Japan provides its refiners with government-backed insurance of up to $7.6 billion per tanker to ship Iranian oil, in line with cover from the international P&I Club.

(

"They (Iran) bought a number of tankers from China and can now do more deliveries ... It's taken some pressure off Iran and facilitated tanker traffic and we are seeing higher exports to China," he told Reuters this week.

The second industry source said the rise in exports to near 1.4 million bpd was a result of traditional buyers finding new ways to secure shipping insurance.

But, like FGE, he estimated that they would fall slightly to around 1.3 million bpd in January.

CHINESE THIRST

Chinese data showed the country bought 593,400 bpd of Iranian crude in December, the second-highest level of daily imports in 2012, a rise that Chinese officials also attributed to an easing of shipping delays.

Previously, Iran's tanker fleet had struggled to meet delivery schedules to China because EU measures in July barred Europe-based insurers from covering tankers that carry Iranian oil.

"China is saying let's up the numbers because no one is doing anything about it, and it looks like Obama has made a political decision not to go to war with Iran," said a senior source with a large independent trading house, referring to U.S. President Barack Obama.

Elena McGovern, oil and gas analyst at Business Monitor International, said: "The implications of preventing Chinese imports from Iran would be too damaging to the (U.S.-China) bilateral relationship. I would be very surprised if Obama were to take China to task on Iranian imports."

Samho Dream: pirates have not made contact

CHUNGMUGONG YISUNSHIN DDH-975 KDX-2 class destroyer, sister to ROKN Dae Joyeong (DDH977), arrived in waters near the Samho Dream at around 1:20 a.m. (Seoul time) and is now operating in its vicinity. The 4,500-ton destroyer was keeping a close watch over the hijacked vessel about 30 miles away, . The South Korean-operated tanker, carrying five The destroyer, which had been operating in Somali waters as part of global efforts to fight piracy, was ordered to speed to the seized ship. Foreign ministry officials earlier said the destroyer will not attempt to intercept or board the hijacked vessel, as the move could put the ship''s crew at a greater risk. The ship''s South Korean operator, Samho Shipping Co., said the pirates have not yet made any contact to make demands for the release of the ship and its crew members

.Balloonimg VLCC traffic past Somalia
The number of very large crude carriers chartered on the spot market for March loadings closed at 107 yesterday — 23 more than the same month in 2009, and just under the 108 reported in March 2007.
Advert

Rise in VLCC charters pushes rates near $60,000 per day.

Spike sees charterers pay a premium on spot market to cover loading dates at end of month.

The number of very large crude carriers chartered on the spot market for March loadings closed at 107 yesterday — 23 more than the same month in 2009, and just under the 108 reported in March 2007.

The spike in March loadings saw charterers pay a premium to cover dates for the final days of the month, thinning out tonnage available for the first 10 days of April.

As a result, daily earnings for VLCCs shipping crude from the Middle East Gulf to Asia are nearing $60,000, and are up 48% since March 1 on the major index route from Saudi Arabia to Japan.

But rates remain soft for Atlantic trading, with VLCCs heading west to the US recording lesser gains, to hit nearly $26,000 per day. Brokers said westbound rates might improve as high distillate draws motivate refiners to increase runs in the US.

So far, some 16 VLCCs have been booked to c over cargoes for the first 10 days of April. Another 30 are expected to come into the market over the next week for this time period, one broker reported, with two VLCCs already booked for later loadings.

Samho Dream: $170 million worth of crude

$170 million worth of crude oil was aboard Samho Dream, which can carry more than 2 million barrels of crude oil.
U.S. refiner Valero Energy Corp said it was the owner of the crude oil cargo aboard the Samho Dream, which was hijacked off the east African coast.

Valero Energy Corporation is an independent petroleum refining and marketing company that owns and operates refineries in the United States, Canada, and Aruba. The Company produces conventional gasolines, distillates, jet fuel, asphalt, petrochemicals, lubricants, and other refined products as well as diesel fuel, low-sulfur and ultra-low-sulfur diesel fuel, and oxygenates.