Shipowners eye 2H for floating storage drawdown

Oil currently stored in tankers on the high seas is likely to be discharged in the second half of this year as Covid-19-hit oil demand recovers, said the chief executives of shipowners International Seaways and Diamond S Shipping.

"The [destocking] process is starting earlier than we thought. Demand is starting to pick up," said Diamond S chief executive Craig Stevenson in a webinar hosted yesterday by Marine Money. "It could be a shorter segue from an unusual into a normal market than we thought."

The amount of oil in floating storage today is 259mn bl, down from its peak of 291mn bl on 20 May, according to data from oil analytics firm Vortexa, as an uptick in global oil demand has digested some of the oil glut. But floating storage levels are still well above the more typical level of 90mn bl on 13 March.

"I'd look for the third quarter for when barrels come out of [floating] storage," said Lois Zabrocky, chief executive of International Seaways.

Oil demand, which reached its low point in April, is the key for determining when de-stocking will accelerate, she said.

While recovering oil demand has already caused some tankers to come out of floating storage, such as the Torm Camilla in the US, others that were booked more recently, particularly for refined product storage in Europe, have just begun their storage.

Diamond S has "a couple of ships" in floating storage, said Stevenson. Four very large crude carriers (VLCCs) owned by International Seaways were fixed with the option to store crude and are on their way to load cargoes. "We will see if they load and sit or load and go on a voyage," said Zabrocky.

Traders are currently storing oil in 61 tankers, sized Handysize up to VLCC, up from 55 tankers on 25 May, according to the Argus floating storage bookings database. The figures are out of the nearly 300 tankers that traders have booked on short-term time charters since March, and do not necessarily include those tankers that are in floating storage because of port congestion.

By Nicholas Watt