North Sea crude oil traders have turned to Suezmaxes for floating storage following a surge in Aframax demurrage rates in the UK Continent.
“Storage should work on Suezmaxes and VLCCs now, better than Aframaxes,” a trader said. “It showed just how bad the market was, that Aframax storage worked.”
Traders unable to sell their cargoes at attractive values have opted to float them in recent weeks on short-term floating storage plays, overwhelmingly on 600,000-barrel Aframaxes.
Thirteen Aframaxes are laden and inactive at anchor, according to S&P Global Platts trade flow software cFlow.
These include SCF Baltica, Dubai Charm, Affinity V, Alfa Baltica, Petronordic, Calida, Atlantic Explorer, Alfa Germania, Astro Saturn, Stride, Vallesina, Hildegaard and Blackcomb Spirit.
“There must be nearly 15 vessels now sitting in the North Sea without firm discharge orders, although they are not being called floating storage by traders,” a shipowner said.
The North Sea swaps structure had widened to encourage temporary floating storage, with local and Asian end-user demand apparently lacking.
The previously weak Aframax freight rates and cheap demurrage, together with the relative ease of selling an Aframax-sized cargo, led traders to favor the smaller vessel size.
However, with cross-North Sea Aframax rates soaring to Worldscale 130 Monday, from w87.5 two weeks ago, daily demurrage rates on Aframaxes have risen to around $35,000/day.
This requires a steep 40 cents/b weekly contango to pay for demurrage costs alone, discounting financing and other associated costs.
Market structure in the North Sea, reflected at the prompt by the weekly North Sea CFDs, has failed to steepen in line with rising Aframax rates.
As a result, traders are exploring fixtures on 1 million-barrel Suezmaxes to store the growing glut of North Sea crude.
Suezmax demurrage rates are currently estimated at around $35,000/day — on par with Aframaxes — despite their larger size.
This equates to a weekly rate of around 24 cents/b, in line with prompt North Sea swaps structure Wednesday. The November 21-25 versus December 12-16 North Sea CFD roll was trading at a contango of around 70 cents/b, averaging 23 cents/b per week across three weeks.
Vessels booked on short-term charter deals of 30-90 days — typical for intended floating storage plays — are typically agreed at lower daily rates than demurrage on spot fixtures.
Both Vitol and Statoil are said to have taken Suezmaxes on subjects for short-term charter deals of 30-90 days.
Vitol is due to co-load Forties onto the Gener8 Spartiate Suezmax from Hound Point November 19 for a 30-90 day short-term charter deal. Traders at Vitol confirmed the fixture.
Statoil also co-loaded Oseberg onto the Shenlong Spirit November 10, and is also said to have short-term charter options.
However, according to shipowner, it is unclear if this is actually storage or is simply being sold into a late delivery window.
Traders at Statoil could not be reached for comment.