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Traders Store Gasoil In Tankers To Monetize Contango

Offshore Storage

Traders have been chartering long-range vessels to store gasoil in tankers off Singapore for one to three months in order to take advantage of a contango in gasoil, Reuters reported on Thursday, citing trading and shipping sources.

Traders are expecting demand for the fuel, which is used in industries and power generation, to increase in the next few months. Usually, demand for gasoil for heating increases in Europe in the winter, and this offers arbitrage windows to send cargoes to Europe from Asia.

In addition, traders are likely taking advantage of the combination of a wide contango as well as cheaper cargo carrying rates. According to Reuters’ sources, 6 to 8 Aframax-sized vessels capable of carrying up to 850,000 barrels each are currently storing gasoil offshore.

“Yes, there is a contango in gasoil and several units have been taken for storage,” a European shipbroker said, as quoted by Reuters.

Rising interest in chartering vessels for storage has raised the Aframax spot charter rates to US$26,000 a day as of early December, the highest rate since March of this year.

Oil major BP, energy and commodity trader Vitol, and Glencore’s shipping unit ST Shipping are among the companies that have charted the vessels to store gasoil.

Related: Soaring Dollar Drags Oil Lower

Ashok Sharma, managing director of shipbroker BRS Baxi Far East in Singapore, told Reuters that ST Shipping had agreed to pay around US$17,250 a day for a 30- to 90-day charter deal.

According to Reuters calculations of trade data, Glencore acquired this month more than 3 million barrels of 500 parts-per-million sulphur gasoil for December loading from Singapore. Vitol has bought around 4 million barrels, while BP has acquired the largest volumes of those three-4.5 million barrels.

By Tsvetana Paraskova for Oilprice.com

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