Analytics Vortexa

Floating storage has rapidly become the topic of the hour as market participants seek to remove the glut of supply in the global oil market

Whilst the oil industry goes through a volatile market correction due to the crash in demand and a return to free market pricing, the current environment also offers huge opportunities for those in the know. In today's blog post, we look at three key benefits of staying ahead of the competition with real-time monitoring of floating storage.

 


 

1. There is money to be made

  • The recent oil price crash has left oil markets in steep contango - when prices for the delivery of oil today are lower than prices for delivery in the future. This means traders can buy oil now and sell this at a profit at a later date.
  • Last week the 6-month Brent crude oil time spread was trading at roughly 10 $/bbl with VLCC time charter rates at around 65,000 $/day, at these levels a trader can store oil on a tanker for 6 months and lock in a profit of 4 $/bbl today. 
  • On an oil tanker this size, that is equivalent to an almost $8 million potential gain. 

 

2. See how many oil tankers are being taken off the market

  • The huge contango price signal is incentivising some ship owners to tie up their vessels into storage contracts.
  • As these vessels move into storage operation, it will reduce the number of vessels available for transporting oil from producers to receivers. 
  • Inevitably, the shrinking pool of available vessels is providing extra support to already high freight rates, affecting anyone moving physical oil around the world. 

 

3. Track a highly responsive source of supply

  • Vessels in floating storage can move to anywhere in the world at relatively short notice. 
  • They represent a very reactive source of supply that can quickly hit the market.
  • As an impending supply glut looms over the oil market, understanding how much is available on vessels around the world will give you the competitive edge.

 


 

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To keep up to date with floating storage and other market news, follow our weekly Insights on vortexa.com/insight

 

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