Industry sources said that supertanker freight rates are rising for the second time in March as producers, refiners, and traders struggle to find ships to transport crude or store the high supply of oil.
On Monday, the freight rates for very large crude-oil carriers (VLCC) from the Middle East Gulf to China were around USD180,000/day, soared from USD125,000/day on Friday and USD90,000/day on Wednesday.
Traders tend to store crude nowadays, as the gap between spot and futures prices is on a record high. The contango spread between May and November Brent crude futures reached USD13.45/barrel, the fresh new high. The six-month spread for US crude also widened to minus USD12.85/barrel, the biggest since February 2009.
Forward prices for VLCCs for the second quarter of this year were trading at around USD170,000/day for the Middle East to China route.
Traders are seeking floating storage, which is typically more pricey than the onshore storage space as the onshore has become rare nowadays. On Monday, VLCC time charter rates for floating storage soared to as much as USD120,000/day from early March of USD40,000/day.
Analyst Ashok Sharma of BRS Baxi said that all the spot tankers deals right now have floating storage tied into them as shippers would not get to make money trading the cargo.
Sources said that even with the high rates, traders could still profit as much as USD7-8 million at current market prices by storing oil onboard BLCCs for six months.
Looking ahead, Analyst Anoop Singh of Braemar ACM Shipbroking opined that freight rates would remain strong as Saudi Arabia is planning to export more than 10 million bpd, combined with the demand for floating storage which could buoy the rates.
However, there is no certainty on how strong would the level stay.
