Distillate stocks in Europe are below September’s record high but remain significantly above last year’s levels, according to market data provider Genscape. Total diesel and gasoil inventories across Flushing, Amsterdam, Rotterdam, Antwerp (FARA) stood at 6.010 million metric tons for the week ending Oct. 2, filling 72.8% of the region’s distillate storage capacity. By comparison, distillate stocks in FARA soared to a record high of 6.178 million tons and 74.8% of capacity was full, Genscape data shows.

Global refinery runs were said to be at 79.4 million b/d in September, nearly 2 million b/d higher than a year ago, according to the International Energy Agency (IEA) in its October Oil Market Report, published this week. Exports of some products, such as gasoline, have dwindled following the end of the U.S. driving season last month, which has added to the oversupply, according Webber.

Meanwhile, European refiners are unlikely to cut run rates amid positive margins, exacerbating the current surplus of distillates, Webber said in the Global Shipping Weekly report.

“Vitol and Shell chartered three Long Range 2 product tankers in anticipation of a worsening product oversupply, potentially expanding the contango for diesel and creating an opportunity for floating storage,” Webber said in the report. “Some forecasters are calling for diesel supplies to grow by as much as 500,000 b/d in the fourth quarter 2015, potentially resulting in an emerging diesel storage catalyst.”

While recent refined product builds may be putting capacity at a number of European and Asian hubs under pressure, this is unlikely to be a global problem, according to the Paris-based IEA. In fact, even these terminals may not be full to the brim: instead, capacity may already have been leased out, and those who have failed to secure sufficient ullage, or spare tank space, are instead obliged to place product on tankers, the IEA suggested.

Nevertheless, several factors are in place for floating storage to potentially develop, said Fargo. Robust activity and high freight rates in the crude tanker markets are likely to be linked to elevated crude runs in Asia, the U.S. and Middle East, which could lead to more oil products exported back to Europe. Demand for crude has strengthened, more than trebling returns for owners of the larger crude tankers. Earnings for very large crude carriers (VLCCs) hauling 265,000 tons of crude to Japan from the Middle East Gulf have averaged $61,600/day in the first nine months of this year, compared with $17,740/day during the same period in 2014, according to data from the London-based Baltic Exchange.

Yet diesel is not the only product that may be placed in floating storage. The Shell-chartered Viktor Bakaev, carrying 90,000 metric tons of jet fuel and originally loaded in mid-August at a port in South Korea, has been anchored outside the French port of Le Havre since Oct. 7, according to satellite tracking data. In addition, “Shell is using one of its own LR2s for gasoil storage off the U.S. Atlantic Coast,” one European broker said.

Analysts indicate the economics of floating storage do not make it a viable option for oil products at this time. The IEA noted that the M1-M3 time spread in the ICE Gasoil contract stood at $0.80/bbl in its October report, which it said was insufficient to cover floating storage costs. “It is apparent that the decision to store product at sea is being taken for logistical, rather than economic reasons,” the IEA said.

The use of floating storage is unlikely to reach levels seen five years ago when the market was flooded with refined products, according to Webber. “Floating product storage peaked … in 2010 (mostly off of Europe),” Webber said. “We do not think floating storage of that scale (or even close) is likely at this point.”