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Platts Jet Fuel

A closer look at Platts jet fuel coverage

Clean tanker floating storage inquiries rise as appetite returns

New York — Fresh floating storage inquiries for clean tankers in recent weeks reflect charterer appetite to take advantage of rock bottom clean tanker rates, though presumptions of potentially cheaper floating storage deals against onshore storage appear short-sighted.

As clean tanker markets rationalize the expected lack of outgoing cargoes to come in the near term, many shipowners are now interested in tying up available tonnage for the traditionally weak summer season ahead.

Since June 26, six LR2s have been placed on floating storage periods of 30-90 days for a rate of $20,000/day in the west of Suez markets. In addition, two medium range tankers were heard on subjects for floating storage for between $12,500-12,750/day for a period of up to 60 days.

Some market participants suggested that onshore storage economics could be less favorable for charterers than floating storage as sentiment continues to deteriorate. Onshore storage economics are vague, but rates showed firmness throughout the course of the second quarter as inquiries rose.

Onshore inventory levels for some oil products continues to draw down as lockdowns ease on the continent. Gasoline inventory levels in the Amsterdam-Rotterdam-Antwerp trading hub fell 9% to 1.252 million mt in the week to July 2.

The flexible dynamics of floating storage could be why they are still pursued, particularly concerning hiring periods.

"Floating storage is not necessarily cheaper but it allows storage for shorter terms -- you can hire for less than a month in some cases whereas landed storage would expect a longer term," Tony Quinn, CEO of oil storage advisors Tankbank International, told Platts. "However, floaters are also nowhere near as flexible for blending."

Others simply see this as charterers strategizing where to keep available oil and be flexible with any discharge required.

"Rates are so low that charterers want options for STS and to avoid any discharge costs for cargoes -- the market is allowing them to explore this option", a charterer said.

Specific oil products loaded onto vessels have not been confirmed, but many market participants believe them to be both gasoline and jet fuel, with the latter still showing steep enough contango curves to make floating storage an attractive option.

Should inquiries still be tabled as the market enters a prolonged period of expected weakness, shipowners could offer highly attractive rates to charterers in recognition of an expected lack of cargoes to be seen in the near term.