By Alaric Nightingale and Alex Longley

(Bloomberg) — The world’s largest oil firms are asking tanker operators to decelerate supply of crude amid an ever- increasing provide glut on land, Europe’s largest proprietor of supertankers stated.

Tankers hauling 2 million-barrel cargoes are delivering them at speeds of about 13 knots, in contrast with a most of 15, Paddy Rodgers, chief government officer of Antwerp, Belgium-based Euronav NV, stated in an interview in London on Thursday. The slower speeds may end in a voyage that might usually take 40 days as an alternative lasting 48. Shore-based provides are getting so huge that it’s possible the necessity for storage at sea could quickly develop, he stated.

The market is contending with a glut of oil that’s not going away as a result of OPEC is insisting it didn’t create the surplus and received’t deal with it alone. Countries throughout the Organisation for Economic Cooperation and Development have a near-record of just about 3 billion barrels of oil stockpiled, the International Energy Agency estimates.

“I’ve not seen a supply-side market like it in terms of the production of oil,” stated Rodgers, a lawyer who joined Euronav twenty years in the past and is predicated in London, after an earlier interview with Bloomberg Television. His firm’s VLCCs earned $55,000 a day final 12 months, double what they made in 2014, thanks partly to gas costs that plunged together with crude, he stated.

Euronav’s shares rose 3.5 p.c to 10.74 euros in Brussels. They’ve dropped 15 p.c this 12 months, giving the corporate a market capitalization of 1.71 billion euros ($1.86 billion).

The major motive for slower speeds is as a result of the provision of oil is so nice that logistics are being strained on the websites the place the cargoes are being delivered, Rodgers stated. In China, common ready occasions are a couple of week when usually there could be no delay, he stated. Vessels are having to attend within the Middle East as effectively, which can also be an abnormality, he stated.

The present want for slower speeds is the alternative of what would usually occur at occasions when charges are low and gas prices excessive. In that situation, a delivery firm could be the one in search of to chop speeds when their vessels are returning to loading ports to gather cargoes. Instead, Euronav ships return again to load ports as quick as attainable.

While demand will acquire quicker than some forecasters anticipate this 12 months due to low oil costs, the rise will not be sufficient to forestall oil being saved at sea, he stated. Euronav would cost roughly 75 cents per barrel every month for storing, in keeping with the CEO. Brent crude for April prices about 80 cents greater than for March, knowledge from ICE Futures Europe present. Traders incur further bills over and above freight.

The incentive for storing at sea is getting greater. The hole between March and June futures — at present about $2.50 — would solely must widen about 20 cents extra to cowl the price of holding barrels at sea, in keeping with analysts together with Jonathan Staubo at Fearnley Securities, a brokerage in Oslo. Glencore Plc is alleged to be storing a minimum of 4 million barrels in ships off Singapore and Malaysia, in keeping with individuals aware of the matter.

Given how far oil costs have plunged, there’s not a lot draw back, Rodgers stated within the interview with Bloomberg Television. The hunch could imply that the International Energy Agency’s forecasts for demand progress are too low, he stated within the interview.

Middle East shipments to the U.S. additionally look like growing for the reason that nation lifted a ban on exports this 12 months, Rodgers stated. The measure made the worth of West Texas Intermediate enhance on a relative foundation in contrast with worldwide grades, making a better incentive to buy barrels from Persian Gulf producers, he stated.

–With help from Grant Smith, Manus Cranny and Anna Edwards.

©2016 Bloomberg News