February 08, 2011 [OPIS] - One 600,000-bbl capacity Large Range 2 clean tanker was booked by Vitol to store gasoil in Europe late last week despite a less-than-encouraging contango price spread, industry sources told OPIS on Tuesday.
This is the first large clean tanker booked for gasoil storage in Europe in recent memory, unlike more than a year ago when the number of tankers storing gasoil in Europe rose to more than 100 as traders took advantage of a wide $10-$15/ton intermonth price contango.
Besides Vitol, there were no other inquiries for more offshore storage vessels.
The front-month gasoil contango spread was at about minus $5.25/ton, with February contract to expire on Wednesday.
The following month spread was at minus $3/ton. Traders said that the contango spread was not expected to cover the vessel storage costs.
The ship, Ellie Lady, was booked by Vitol for about $15,750 a day for at least a two-month period, with an option to extend another 30 days.
However, it is noted that different trading companies have different economics, depending on demand/supply balance, cargo price and freight rates.
A company may opt to store fuel onboard the ship if it does find a suitable outlet for its cargo at the price sought.
The European distillates market is facing a general oversupply as reflected in the contango price trend.
The U.S. remains a regular exporter of distillates to Europe, with at least a few Large Range 1 ships sailing across the pond each month.
The U.S. has a burgeoning distillates inventory amid high production backed by strong crack spreads.
