Sluggish global economic recovery after the COVID-19 pandemic has led to a fresh build in worldwide crude oil supplies. As a result, international commodity traders, such as Trafigura, book tankers as floating storage for millions of barrels of unsold crude oil and refined products. Shipping data indicated that Trafigura had chartered at least five very large crude-oil carriers (VLCCs), which can store up to 2 million barrels of oil each.
Fellow trading companies such as Vitol, Glencore, and Litasco, have also booked large vessels to store oil products for 90 days, shipping sources said. One of them said floating storage returned again because of the bearish sentiment in the oil market. The source added that freight rates are currently low enough to cover storage costs, while the inter-month Brent spreads are now wide.
Worldwide oil stocks are currently 600 million barrels above last year’s levels despite withdrawals of about 1.6 million bpd in the last 30 days. Analysts said that most of the withdrawals were in crude oil stockpile, while products inventories remained high. Adding to the gloom, refining margins are currently weak, and demand outlook is worsening in China.
