And when it comes to the future trajectory of oil prices, that is “a worrying sign for the fall,” he said. “It’s peak season for oil buying, yet there are still a bunch of tankers full of oil sitting in the Atlantic Basin waiting to be sold,” Longson wrote in a June 22 client note. Shipping analysts earlier this year credited higher oil demand for giving the crude tanker market a “stellar” start to 2015, with the expectation that 2016 will also be better than expected.īut there aren’t enough buyers for all the crude oil out there, according to Morgan Stanley’s Adam Longson. “The disconnect between the markets is at unprecedented levels, and something has to give,” Sen observed in a June 23 research note. “There’s a lot of crude oil that’s trying to find a home, so that’s good for the tanker market, that limits the potential for a crude-oil rally and puts pressure on the price,” Olivier Jakob, managing director of Switzerland-based Petromatrix, told the Journal.Īmrita Sen, co-founder and chief oil analyst at U.K.-based energy market consultancy Energy Aspects said the absolutely dire West African crude balances have finally weighed on Brent time spreads, with the contango out to January 2016 widening out, amid extensive liquidation. Still, some analysts fear the robust market-spurred by what they believe is fleeting global demand-could be bearish for oil prices in coming months. Rates for products carriers top $30,000 a day for LR1 (long-range) and LR2 fixtures to the Arabian Gulf/Far East, and MR (medium-range) tankers cost at least $20,000 a day. Current rates for large crude tankers are between $40,000 and $50,000 a day. In fact, earnings for the gravity-defying tanker market remain strong ahead of the so-called traditionally week third quarter. “Tankers are making serious money, in what’s turning into the best tanker market since 2008,” Wells Fargo analyst Michael Webber was quoted as saying. In another sign that oil is set to fall, the Baltic Dirty Tanker Index, which tracks the rates to hire oil tankers plying 16 routes, shot up 25% in June to its highest level since January 2014, the Wall Street Journal reported June 25. Industry observers say the physical market for crude oil will remain under pressure as traders unwind profitable storage plays after several months that that saw them holding millions of barrels on tankers at sea. Until Monday, Brent had been trapped in a $62 per bbl to $65 per bbl range, and WTI had traded within a $59 per bbl to $61 per bbl range. crude finished at $58.33 per bbl, down $1.30-its lowest settlement since June 8. Brent crude closed down $1.25 to $62.01 per bbl a barrel, its weakest finish since June 5. benchmark West Texas Intermediate (WTI) crude fell 2% to near $44 per barrel (bbl)-a six-year low-and Brent crude, the international marker, erased about 2%, settling around $53 per bbl.Ĭrude futures on June 29 hit three-week lows as Greece shut its banks and imposed capital controls, causing widespread risk aversion, while Iran looked likely to extend nuclear negotiations with the West to export more of its oil into an oversupplied market. At the time of this writing, nearly 55 million barrels were being stored on tankers-more than double the amount in January, Thomson Reuters data show. The release of floating oil volumes will introduce additional supply into an already saturated market and exacerbate the number of unsold Mediterranean, North Sea and West African cargoes in the Atlantic Basin. The vessels are competing with new loadings, as well as time-chartered cargoes that major trading houses such as Trafigura and Unipec booked to store crude months ago and are now selling. Off the coast of West Africa and in the waters of the North Sea, supertankers holding million barrels of oil have essentially become accidental storage as their owners seek customers. Last year’s crude sell-off pushed the cost of oil for prompt delivery to well below future prices, making it profitable to purchase oil and store it to sale at a later time. Three months into oil’s rebound from a six-year low, the global tanker market is sending clues that further upside momentum in crude prices may be limited.Ī sudden surge in demand for supertankers drove benchmark charter rates nearly 60% higher at the end of May.
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