By Jonathan Saul and Libby George

LONDON, Nov 19 (Reuters) – Record excessive freight charges are creating extra complications for merchants trying to home hundreds of thousands of barrels of unsold crude oil and who already face potential losses resulting from file excessive shares.

They should determine on whether or not to make use of tankers for long term storage till they’ll promote their cargoes, or dump them at much more discounted costs with a purpose to preserve wells operating.

This is predicted to return at an even bigger price as charges for supertankers have soared – reaching their highest since 2008 at over $100,000 a day final month and presently round $70,000 a day.

Some have already been caught out with further oil, and had no alternative however to maintain it on vessels. Trade sources stated the costly freight meant this was not a money-making play – and is unlikely to develop into one any time quickly.

“They’re losing money, and they want to place the vessel as fast as possible,” stated Eugene Lindell, senior crude market analyst with JBC. “It’s putting pressure on anyone who has to take a vessel out.”

Booking a supertanker on a one-year time constitution has additionally spiked to over $50,000 a day – double the speed final 12 months – with the general month-to-month price of storing oil on a vessel estimated at simply over $2 million.

HOT YEAR FOR TANKERS

A mixture of cut price shopping for by oil importers and refineries and fewer new vessel deliveries this 12 months meant that the tanker market was having its finest 12 months for the reason that 2008 monetary disaster, Omar Nokta with Clarksons Platou Securities stated.

“Capacity utilisation has jumped sharply as a consequence, nearly reaching 90 percent, the highest level since 2008,” Nokta stated. “As seasonal factors now turn up, we expect to see more of the above with floating storage possibly becoming an even bigger factor.”

Placing crude in storage is simply worthwhile if costs for supply sooner or later are at a big sufficient premium to the present ranges – a market construction often called contango. The contango additionally needs to be giant sufficient to pay for the price of storage, which is often a lot increased onships than land tanks.

Earlier this 12 months, as a lot as 50 million barrels of oil was estimated to have been earmarked for sea storage choices with merchants trying to promote the cargoes afterward at a revenue.

That speculative play fizzled out because the contango flattened rapidly.

“If it (a wide contango) gets there, it would be a very, very small amount of time … before the freight rate goes up and it closes,” one oil dealer stated. “(Tanker) owners are notoriously bad at hiking the rates in no time at all.”

The buying and selling technique was final utilized in 2009, when slumping costs led merchants to park greater than 100 million barrels of oil on tankers at sea earlier than shares have been offered off. At the time, oil tanker charges have been at rock-bottom ranges, and house owners have been eager for long-term leases.

This time spherical, tanker house owners have the higher hand, with worldwide bottlenecks and heavy site visitors to grease refineries holding vessels totally booked. (Editing by William Hardy)

(c) Copyright Thomson Reuters 2015.

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