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Norway’s Statoil has chartered the last ultra-large crude carrier in the world, TI Europe, to Malaysia, where the oil will be transferred onto smaller vessels to send to the company’s clients on the continent. ULCCs can carry up to 3 million barrels of crude.
Statoil’s senior vice president of crude and refining told Reuters that the ULCC was picked in a bid to cut down on the time it takes the company’s clients to transport the oil they buy from Statoil. The chartering comes as the Brent crude futures market swung into backwardation, with spot prices higher than those of cargoes for future delivery.
“Our strategy in Asia for crude has been to basically make long-haul barrels available on a short-haul basis to bring flexibility to customers in Asia. Most refiners, in a backwardated market, cherish a three-day sailing of an Atlantic basin grade than 70 days from North America,” Stale Endre Berg said.
At the moment, the vessel is being loaded with crude in the Strait of Malacca, one of the world’s busiest tanker shipping channels. It is receiving Angolan crude from the VLCC Athenian Victory but, Reuters notes, Statoil also ships oil from the North Sea, and North and South America to clients in Asia.
Currently, there are more than 30 tankers sitting in the Strait of Malacca, used as floating storage as well as fuel oil blending before the cargo is sent on to destinations in Asia. Floating storage, according to Berg, is a bargain right now, as freight rates have fallen and capital is easy to tap in most places where the Norwegian company does business.
“In a contango market, life is easier. In a backwardated market, you’ll have to churn and have to have a higher frequency through your activity,” Berg told Reuters. The oil market swung into backwardation recently as benchmark prices began rising thanks to renewed optimism about the effect the OPEC deal is having on global supplies of crude, and most recently, to the prospect of supply disruptions in Iraq’s Kurdistan autonomous region, following an overwhelming vote for independence from Baghdad.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.