US, WASHINGTON (ORDO NEWS) — Oil refineries seek to secure tankers for storing surplus fuel, diesel, and gasoline, as the reduction in demand caused by the outbreak of coronavirus has led to an oversupply of oil and petroleum products in the world, writes The Financial Times.
So far, the main focus on the maritime shipping market has been focused on raising rates for very large crude oil carriers (VLCCs) capable of transporting more than 2 million barrels.
Now the emphasis has shifted to tankers for transporting long-range products that are used to transport finished petroleum products and have become more expensive for chartering than VLCC.
The cost of hiring a Long Range 2 tanker that can carry around 800 thousand barrels of oil products more than doubled over the past week and reached a record $ 173 thousand a day on April 27, according to Clarksons Platou Securities. Daily rates for LR1 tankers, which can carry from 345 thousand to 615 thousand barrels of gasoline, also doubled, reaching almost $ 112 thousand.
VLCC rates, in contrast, fell slightly to about $ 167 thousand a day, shortly before the agreement on the reduction of oil production agreed upon by OPEC countries and Russia came into force in early May.
“The VLCC market continues to be strong, but we are starting to see how demand flows into the commodity market,” said Lois Zabrocki, executive director of International Seaways, registered in New York. “Refineries are facing problems that recalibrate supply and demand.”
The world typically consumes about 100 million barrels of oil and finished goods per day and produces about the same. However, when most of the industrialized world is in a closed position, demand fell by 30 million barrels per day, which led to a huge oversupply.
As a result, processors are faced with a serious choice: find places to store unwanted products or reduce production volumes (or even close production). Since land-based storage facilities are already full or leased, many processors turn to floating storage facilities.
According to Vortexa analyst firm, the volume of key petroleum products in floating storage facilities around the world reached 72 million barrels on Sunday, compared with 33.7 million a month earlier.
“The massive drop in demand for gasoline, diesel and aviation fuel with the proliferation of COVID-19 has led to a huge worldwide surplus of products,” said Jay Maru, a senior analyst at Vortexa.
“Oil refineries are cutting production, but in the meantime, deliveries are increasing with minimal onshore storage. We see traders, oil refiners and large companies demanding that tankers be used as floating storage facilities,” he said.
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