520 Oil Tankers used for storage

I haven't talked much about the oil tanker market. This market hasn't had the financial crisis of other types of ships.

One of the main reasons is because as the demand for oil dropped, traders have been using the ships to store oil. This is because the future price of oil is more than the spot (contango).

One of the tanker owners, Euronav, is rather optomstic.

The oil price contango has seen oil traders book VLCCs for oil storage in recent weeks, with 22 from the global fleet of 520 presently used as floating storage according to London broker Gibson.

The move has boosted the Baltic Exchange’s average time charter for VLCCs to $47,600 per day by Friday, up from $28,000 seen earlier this month.

Mr de Stoop (of Euronav) rejected fears that VLCCs will flood the market when the oil price contango ended, depressing rates.

“All those ships will be in storage at different places in the world, not in the same location and they will all be booked for a voyage [when the contract ends],” he said.

I don't think the VLCC market will be improving in 2009. At the moment the future price of oil is more than the spot market, but I don't think that will continue for long. I suspect the tanker market will take a dip in about 3-4 months.