Wednesday, June 24, 2009

Surplus of oil products - ships used for storage

Oil has been going up due to speculation, (as mentioned in my blog of June 14, click here) and also due to the stockpiling by China.

China's stockpile increases oil prices

Since crude oil and other commodity prices plunged last year - oil tumbled from $147 last July to nearly $33 in December - China has been rushing to build up stockpiles at bargain prices, economists say. That motive, more than a revival in actual industrial demand, has driven its recent import boom of oil, copper and other metals.

Now we are seeing such a surplus of refined oil products, that..

AN INCREASING number of very large crude carrier newbuildings are being hired to store clean petroleum products as an alternative to land-based storage.

VLCCs and suezmax tankers are being chartered straight from the delivery yard before ever taking a crude cargo, brokers have reported

Even more interesting is this comment.

Oil demand has been so flabby in recent months, the refiners have already run the crude and are stuck with the product,” said SSY research director Mark Jenkins.

Assuming this is true, my price target of 55.00 for oil by August may not be too far off the mark. Eventually that will lead to lower bunker fuel prices.

click here for article from Lloyd's List "VLCCS NEWBUILDS USED FOR PRODUCT TANKER STORAGE"

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