June 24, 2011 [OPIS] - A combination of cheap freight rates and a lackluster Gulf Coast vacuum gasoil market has led to a rare move to store the refinery feedstock onboard a 1-million-bbl capacity oil tanker off the U.S. Gulf Coast, shipping sources told OPIS.
One trader has made that offshore storage move, but there could be more following suit. “Storing fuel in a large ship is cheaper than storing in the onshore tanks right now,” a source said. Late last week, Glencore chartered a Suezmax tanker, Hvratska, for 30-45 days at $16,000/day to store low sulfur VGO.
The freight rate for a similar ship was over $20,000/day a month ago. The demurrage cost for a Suezmax tanker is $25,000/day versus close to $30,000/day a month ago. Glencore transferred VGO cargoes from three smaller ships to the large Suezmax tanker in a ship-to-ship transfer at sea. The Suezmax tanker market is depressed by ample supply and light inquiries.
In the Gulf Coast VGO market, domestic supply has overwhelmed demand, keeping imports out for the time being. However, the market outlook is cautiously bullish in the near term because of a closed trans-Atlantic arbitrage window and a narrower WTI/Brent spread.
