The move will take the Hong Kong-listed company, which has hired about 20 trading personnel from oil major BP (BP.L), a step closer to realising its ambitions to become a trading force in Asia and globally.
“It’s expected that they will take storage. The question is whether they will make do with the 200,000 cu m that they now have or whether they will look for more,” a Singapore-based Asian trader said.
“It may not be likely as they have also bought quite a few tankers, which they can use as de facto floating storages if there is a need. Also, beyond the current capacity that they have taken, there isn’t much more land-storage capacity available in Singapore.”
The new tanks that Brightoil has taken are at Horizon Terminals. Industry sources said the tanks have leased for three to five years, in line with industry norms.
Currently, long-term storages in Singapore are leased at $5.00-$6.00 per cu m per month.
Having sufficient storage capacity is regarded as an advantage in oil trading as it allows players the flexibility to buy more oil than they need when prices are cheap and to sell when the market rises.
BUILD UP
But storage-backed trading plays become more difficult when several players hold similar-sized facilities, as is the case in the Asian fuel oil market now.
However, even with the new 200,000 cu m capacity, Brightoil is still short, in terms of storage capacity, compared with the market’s largest players such as Shell, Glencore, Vitol, BP and PetroChina, which have 400,000-600,000 cu m each. “They may not have the same size as the others but they do have a lot of capacity and niche outlets in China, which none of the others have, and all the new tankers that are coming onstream,” another trader said.
“That would be a massive advantage and can more than make up for the lack of capacity in Singapore. It remains to be seen how they will leverage their China operations to maximise their trading activities here.”
Brightoil, which began trading in Singapore four years ago, is planning to expand its storage capacity in China to nearly 15 million cu m in its home base of Shenzhen, Zhoushan and Dalian in the next few years.
It has also agreed to buy five new Very Large Crude Carriers (VLCCs) for $537.5 million, to be delivered between second-half 2012 and first-quarter 2013, in addition to the two double-hulled Aframax tankers, of 115,000 dwt each, that it had bought for $115 million.
The firm aims to build a global oil-trading business, which will also distillates and crude, with a projected worldwide trading staff of 85 headquartered in Singapore and has bought 52,000 square feet (4,830 sq metres) of office space to house its new trading company, which is expected to start operations by end-September.
Brightoil has also been the most active player in the swaps market in the past one month, trading more than a million tonnes, and taking a long position, totalling 455,000 tonnes from Aug. 13, on the front-month September contract.
