Shell in talks to charter supertankers for storage

At least three supertankers are to be chartered by Royal Dutch Shell to store crude oil at sea, if talks come to fruition. 

The floating storage need comes as traders brace for a sharp rise in global stocks after OPEC and its allies abandoned a production cut deal, shipping sources have said.

The sources said Shell has provisionally booked three 2-million-barrel vessels, known as very large crude carriers (VLCCs), for storage options for at least three months. 

Once the charters are fully negotiated, or fixed, they will be the first tankers to be used for floating storage after the recent oil price crash.  

A Shell spokeswoman declined to comment, but the shipping sources said at least one of the vessels had an option to store oil in the United States.

A glut of crude oil in global spot markets is forcing the price of oil for immediate delivery below forward futures costs, (known as a contango structure), making it potentially profitable to buy oil, store it offshore on vessels and then sell it later at higher prices.

Baltic Exchange data on Tuesday showed the cost of hiring a tanker on the benchmark Middle East Gulf to China route had jumped to over $70,000 a day (up from under $40,000 a day on Monday and under $20,000 a day last month).

Brent crude futures for nearby delivery are trading at their biggest discount to the November contract in over four years, according to Refinitiv data. Daily charter rates were being quoted around $100,000 a day on Wednesday, indicating demand for tankers.

While another shipping source said the economics of floating storage were still not viable at this stage, others pointed to the growing glut of oil and the need to park cargoes.

For more information visit www.shell.com

13th March 2020