Whatever Floats Your Boat

8 May 2015: Floating storage appears to be picking up. Ever since the dramatic decline in oil prices, which started in the second half of 2014, charterers and ship owners alike have been eyeing the forward oil market. The goal was to determine at what point the contango in the oil market was going to be high enough to make storing crude on tankers commercially viable. This happened at the end of 2014 and in short succession (first) traders and (later) oil companies took some 30 VLCCs on time charter for periods up to 12 months. However, as oil prices bounced back the forward curve flattened. At the same time tanker rates strengthened and it appears that storage economics quickly deteriorated. As a result very few vessels were actually utilized for floating storage. Most vessels ended up being actively traded in the spot market. That situation seems to have changed in the last 4-6 weeks though as more vessels are again being used to store crude oil, even though the traditional economics do not seem to support it. Is there something else going on? Download here