The Oil Industry’s Glut Has a Bright Spot: Tanker Storage

Shipping companies, which can command more than $200,000 a day for a vessel, are cashing in on increased demand.

The price of oil has plunged, but the price of finding a place to put it has soared. And if you are in the business of providing a temporary home for the world’s glut of crude, you’ve hit the jackpot.

More and more massive tankers at sea are being used simply to hold the oil — as much as two million barrels per vessel — until it is wanted. Other vessels are busy carrying it to buyers like China, which is taking advantage of prices not seen in two decades.

Tankers are in demand, and their rates, as low as $25,000 a day in February, have ballooned to nearly $200,000 a day, even hitting almost $300,000 at one point.

“We are one of the few industries making money in this period,” said Hugo de Stoop, chief executive of Belgian-based Euronav, one of the world’s largest tanker companies. The current market for vessels, he added, “is totally and completely unusual.”

Shipping is a business of wild swings that tax a vessel operator’s patience and balance sheet, and right now tanker owners are profiting from the same forces that are causing layoffs and bankruptcies at oil companies elsewhere.

Demand for oil has plummeted by about one-third as airplanes are parked on runways and cars sit at home, stilled by lockdowns aimed at curbing the spread of the coronavirus.

The flood is filling tank farms to the brim, so traders and producers are chartering ships like Mr. de Stoop’s 70 oil tankers to hold their crude, waiting for a more advantageous moment to unload it.

The tanker industry is having its best spell in at least a decade, analysts say.

Ships owned by companies like Euronav are like taxis, waiting for fares. Most of Euronav’s ships operate at so-called spot rates, essentially whatever they negotiate with customers, which vary from day to day.

Oil companies have been chartering Euronav’s very large crude carriers, or V.L.C.C.s — tankers longer than three football fields — for $150,000 to $200,000 a day, Mr. de Stoop said, depending on where they are going. As it costs about $18,000 a day to run a ship — for expenses like paying and feeding a crew of 25 — profits at the moment are huge.

Source: nytimes.com