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Traders Look To Store Diesel At Sea As Second Wave Hits Demand

In another sign that the second coronavirus wave is hitting fuel demand, oil trading firms are looking for new supertankers to use them as floating storage for diesel as demand is expected to suffer from the renewed lockdowns in major European economies, trade and shipping sources told Reuters.

Diesel in global floating storage is expected to increase as major oil firms and trading houses are on the prowl for supertankers, expecting lower than usual diesel demand from the industrial, heating, and transport sector in the coming months.

Concerns about fuel demand intensified this week after two of the largest economies in Europe—Germany and France—announced lockdowns, which the market was not expecting two or three weeks ago. Industry professionals and executives did not believe that countries would resort again to nationwide lockdowns. Yet, France did, and as of Friday, people are allowed to go out only for shopping for essential items, for medical reasons, or for an hour-long exercise. The measure will last until the end of November, French President Emmanuel Macron said.

As the market braces for faltering economic and oil demand recovery, oil traders are reportedly looking to take advantage of the currently low tanker rates and the contango structure of the market to store diesel now with the intention of selling it at a later stage when demand and prices recover.

Middle distillates have been struggling to find markets amid weak demand in recent months. Slower-than-expected fuel demand recovery amid the economic slump and still precariously low aviation fuel consumption have sent distillate stocks around the world to multi-year highs. This, in turn, has led to disastrously low refining margins in every part of the world, discouraging refiners from processing increased volumes of crude into fuels.

Probably one of the strongest signals of a growing global glut in distillates is increased interest from traders to hire oil product tankers to store diesel as floating storage, tanker owners and tanker-tracking firms told Bloomberg in the middle of September.  

By Charles Kennedy for Oilprice.com

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  • George Doolittle on October 31 2020 said:
    US refining margins are absolutely fantastic going on all Year now given how cheap ahem "foreign oil" ahem is at the moment. I would agree this is not reflected in the least by equity price moves to the upside unlike say as has been the case in Pinterest or Etsy....let alone even more hilariously $zm Zoom.

    Still this is a hugely profitable business if you're BP running the Whiting Refining Complex in Indiana or running "all of the above" along the Gulf Coast at the moment. Same said be true of the North Dakota refinery operations. As Tesla is proving as John D. Rockefeller did so before that having a very low price for a good is by far and away the best way to achieve market dominance as once the sale be made all after that becomes pure profit. (Google and "search" being another truly awesome example. Even Netflix and ownership of the "Movie App." Uber is another one.)

    In short "porting" your refined product by sticking it on a very expensive ship in order to wait on some future event is a great way to lose a fortune as every pipeline operator on Earth let alone inside North America will be jumping for joy on this ahem "news" ahem. And of course if your trying to take down the entire Global oil industry via natural gas a report such as this if true is just another "hits keep coming and we win again" event. Same said be true of the pure BEV market as it's not like the Utility Company wants to see everyone not using electricity anymore in the hopes that they can gouge their retail customers to the point of losing them. Those customers are quickly becoming "energy producers" now as well thus providing for a much better run Utility which indeed has been reflected in the stock price of the likes of distributed grid Kings like Next Era Energy and $xcel Excel Energy. Even big time coal baseloaders like AEP and Duke are suddenly on the up...and obviously the USA does not use oil to produce electricity. In short "take the cash" as a million barrels of diesel fuel is money now and not a small amount in the USA. The alternative is the shipping Company will buy your integrated oil business...or just start a brand new one from scratch. 4-5000 thousand barrels of oil produced and refined daily is an awesome amount of energy product in the US market at the moment. That could be up to 200,000 gallons of fuel daily which at even ten cents retail is $20,000 us dollars a day plus the much higher margin products sold at said "convenient store" like bread and cheese and everything else under the sun. In the alternative one can "live in the futures" this is true...and thus "pay them instead of you..

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