The price of oil has plunged, but the price of finding a place to put it has soared. And if you are in the business of providing a temporary home for the world’s glut of crude, you’ve hit the jackpot.
More and more massive tankers at sea are being used simply to hold the oil — as much as 2 million barrels per vessel — until it is wanted. Other vessels are busy carrying it to buyers like China, which is taking advantage of prices not seen in two decades.
Tankers are in demand, and their rates, as low as $25,000 a day in February, have ballooned to nearly $200,000 a day.
“We are one of the few industries making money in this period,” said Hugo de Stoop, chief executive of Belgium-based Euronav, one of the world’s largest tanker companies. The current market for vessels, he added, “is totally and completely unusual.”
Right now tanker owners are profiting from the same forces that are causing layoffs and bankruptcies at oil companies elsewhere.
Demand for oil has plummeted by about one-third as airplanes are parked on runways and cars sit at home, stilled by lockdowns aimed at curbing the spread of the coronavirus. At the same time, Saudi Arabia and its allies have ramped up output, as part of a price war with Russia.
The volume of oil idling off places like Fujairah in the United Arab Emirates or near a Chevron refinery in Long Beach, California, has soared 40% since the beginning of April, to 158 million barrels, said Alexander Booth, head of market analysis at Kpler, which tracks petroleum shipments. That is more oil than the world would consume over a day and a half in normal times.
As shipowners relish the moment, some analysts warn that this corner of the oil industry is unlikely to thrive for long because of depressed demand for crude.
Jonathan Chappell, a shipping analyst at Evercore ISI, a securities broker, said once normality returns the futures market will shift, and traders and companies will liquidate the inventories of oil built up at sea and on land, slashing the need for ships.
“At some point,” he said, “you are going to have to work through the hangover.”
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