Exclusive: Oil glut spurs top traders to book supertankers for storage at sea

Thu Jan 8, 2015 12:29pm EST
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By Jonathan Saul, Claire Milhench and David Sheppard

LONDON (Reuters) - Some of the world's largest oil traders have this week hired supertankers to store crude at sea, marking a milestone in the build-up of the global glut.

Trading firms including Vitol [VITOLV.UL], Trafigura [TRAFGF.UL] and energy major Shell (RDSa.L: Quote) have all booked crude tankers for up to 12 months, freight brokers and shipping sources told Reuters.

They said the flurry of long-term bookings was unusual and suggested traders could use the vessels to store excess crude at sea until prices rebound, repeating a popular 2009 trading gambit when prices last crashed.

The more than 50 percent fall in spot prices now allows traders to make money by storing the crude for delivery months down the line, when prices are expected to recover.

The price of Brent crude is now around $8 a barrel higher for delivery at the end of 2015, with its premium rising sharply over spot prices this week due to forecasts for a large surplus in the first half of this year, in a market structure known as contango.

Brent LCOc1 hit a 5 1/2-year low of $49.66 a barrel on Wednesday. It was trading around $51 a barrel on Thursday. [O/R]

While major energy traders will often hire vessels for long periods as part of their day-to-day operations, industry sources said the fixtures booked in the last week had the option to hold oil in storage. Some could still be used for conventional oil transportation.

Vitol, the world's largest independent oil trader, has booked the TI Oceania Ultra Large Crude Carrier, a 3 million barrel capacity mega-ship that is one of the biggest ocean going vessels in the world by dead weight tonnage (DWT).   Continued...

Fuel prices are seen on a petrol station pump in Rome January 6, 2015. REUTERS/Max Rossi