Weaker demand for raw materials in China has caused Brent crude, the international benchmark, to fall more than 10 per cent in less than a month to about $57 a barrel. It has also pushed rates for oil-carrying supertankers down by three-quarters to about $23,000 a day.
Spot market prices for oil fell so much in February that they briefly became cheaper than contracts for delivery in six months’ time, a phenomenon known as “contango” that usually indicates a heavily oversupplied market. That can create a trading opportunity for commodity houses, which have reportedly inquired with shipowners about hiring vessels to use as floating storage.
But market-watchers think a big uptick in the number of ships used for floating storage by those seeking trading profits is unlikely, unless coronavirus fears send spot prices even lower from here.
Instead, brokers say, traders are now more interested in ship-to-ship transfers, moving oil from tankers chartered at high rates to cheaper ones. Tanker prices surged between October and January, because of US sanctions levelled against units of Cosco, China’s largest tanker owner. Traders were chartering supertankers — very large crude carriers (VLCC) that can carry 2m barrels of oil — for $100,000 a day at the height of the market.
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