Port delays make China floating storage focus

Port delays often exceeding a month off China's coast, where over 50 very large crude carriers (VLCCs) sit with crude oil, continue to slow floating storage destocking.

Of the more than 50 VLCCs laden with crude oil sitting off China's northern coast, 31 are in floating storage — defined as idling for a week or longer — and have been waiting for an average of 21 days, according to Argus analysis of Vortexa data.

For context, that is more than half of the 60 VLCCs that are currently in floating storage worldwide at a time when floating storage volumes are more than triple the norm.

One of the VLCCs that is experiencing a longer-than-average delay is the Kirkuk, which has been idling near the Chinese port of Qingdao for 37 days, after arriving with a Nigerian crude cargo loaded back in late April.

A flood of low-cost crude imports into China since June has overburdened the Shandong region's pipeline and storage capacity, preventing arriving tankers from offloading on time.

Long voyage ahead for floating storage wind down

A tentative rebalancing of the oil market following the April-May price war has drawn some crude out of floating storage, but the process has been slow. China is not the only region where tanker-stored crude oil is lingering. Another region attracting crude floating storage is Canada's east coast, where the Eliza VLCC arrived from the US Gulf coast on 1 July for what has become the tanker's second floating storage stint. The tanker, which Shell has under time charter for $120,000/d according to the Argus floating storage bookings database, previously was sitting near Louisiana Offshore Oil Port (LOOP) after loading there on 7 April.

Shipowners in June said they expect a floating storage drawdown in the second half of this year, with the extent and specific timing dependent on a recovery in global oil demand.

A muted rebound of the global economy because of the ongoing Covid-19 pandemic could mean that higher-than-usual floating storage persists into 2021. Research and advisory firm McQuilling Services forecasts the number of VLCCs in floating storage will fall to 51 by December, down from a June peak of 76 VLCCs, but still above the 30 that it says were in floating storage in February.

By Nicholas Watt