Clean tanker floating storage interest renewed
Charterers have shown renewed interest in floating storage for oil products in Europe, as freight rates have fallen significantly since April, despite the contango price structure having flattened from last month.
Gunvor's chartering arm Clearlake put the Zantoro on subjects this week to store a 90,000t cargo near Europe for 45-90 days at $34,000/d with delivery in Gibraltar and redelivery in the Mediterranean or northwest Europe. And other firms are also offering cargoes for storage or for voyages with an option of storage instead, shipbrokers said. Trading firm Trafigura is seeking a ship for a 60,000t-80,000t diesel cargo in the North Sea with storage options for 30-90 days. Glencore's ST Shipping is also offering a 90,000t short-haul diesel cargo with a 30-90 day storage option and Total is looking to store jet fuel in west Africa for 30-90 days, according to market participants.
But as with previous storage deals on offer, charterers looking to have storage as an option probably want flexibility in case floating storage economics become viable. One shipbroker said the cargoes are "very much opportunities" for charterers but "not firm" and that they would take a vessel for storage "if the numbers [shipowners] offer make financial sense".
At $34,000/d, Clearlake would effectively pay just under 38¢/t a day for a 90,000t intake, before accounting for other operational costs such as bunkers, insurance and port costs. Prompt fob French diesel prices closed at $289.25/t yesterday, while Ice June gasoil settled at $299.50/t, and Ice July gasoil at $311.25/t. The discount of prompt diesel prices to the July contract is $22/t. If the ship loaded today and discharged on 13 July, one day after the expiry of the contract, Clearlake would pay $20.02/t in chartering costs to store the cargo for 53 days. But a charterer booking a ship now would probably load the cargo later than today, requiring fewer days of storage, assuming there are no logistical issues to delay discharging. This means that storage plays could be profitable for charterers, depending on how much risk can be mitigated.
The contango price structure on gasoil remains relatively steep, but flattened from earlier weeks, as countries started slowly lifting Covid-19 lockdowns. But freight prices were extremely high in April which made it increasingly difficult for traders looking for a time-spread arbitrage window by storing products. Storage bookings slowed as a result, the Argus floating storage bookings database shows. But in the past few weeks, freight prices have fallen more quickly than the prompt diesel discount to second month prices. The prompt French NWE diesel to second month gasoil discount fell by 55pc from 27 April to 20 May, while the Mediterranean to Japan LR2 freight rate fell by 69pc in the same period.
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