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Vet67to82 (< 20)

Shipping used for Storage - ( 1 )

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149

February 12, 2009 – Comments (3) | RELATED TICKERS: DHT , DXO.DL.DL , FRO

Part 1:

There are 33 very large crude carriers (VLCCs) being used to store 60 - 80 million bbls of crude:

>> Iran leased 6 vlccs in mid-December 2008 from the National Iranian Tanker Company (NITC) for storage

>> Shell has leased the following vlccs for storage

1) " Tenyo " estimated 30 - 60 days @ $65,000 per day
2) " Leander " - unknown time period @ unknown price
3) " Atlantic Prosperity " estimated 45 days @ $59,000 per day
4) " Centennial Jewel " estimated 30 - 60 days @ unknown per day
5) " name unknown " estimated 60 - 90 days @ unknown per day
6) " Eliza " estimated 60 - 90 days @ $68,000 per day
7) " Front Shanghai ** " estimated 2 - 3 months @ $62500 per day
8) " Front Circassia ** " - unknown time period @ unknown price
9) " Universal Peace * " - unknown time period @ unknown price


* Hanbada Corp (Korea)
** Frontline Tanker (FRO)

------------ more to follow ----------------

3 Comments – Post Your Own

#1) On February 12, 2009 at 10:04 PM, lquadland10 (< 20) wrote:

Ahh... That is where all that Iraq oil went.

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#2) On February 13, 2009 at 12:15 AM, Vet67to82 (< 20) wrote:

   Keep in mind that each of these very large crude carriers being used for storage, is NOT available for use in transporting crude.  This and other factors are supporting tanker day rates. 

(1) tankers slowed down due to very high bunker crude price that surged above $500 per metric ton (which are a tad under $300 at this time).  Computer programs became available, allowing shipping companies to punch in the per ship metrics,  to show the optimum speed to proceed at.  If you go too slow you're losing money from the dayrate side, if you go too fast, you're burning expensive bunker fuel for no additional gain.  Since a trip could burn up $1.25 million dollars in fuel, you can understand how important knowing the best speed is.   

(2) bunker fuel is the dregs after the refiners have taken everything they can out.  Sometimes, bunker has to be improved with diesel, or other grades to make it workable.  With refineries going offline for maint.  the availability of bunker fuel surely will be impacted negatively, so I fully expect you won't see vlccs zipping along anytime soon. 

 This is important as the analysts have concerns about the impact of new ships (despite the order delays and cancellations we keep hearing about) on tanker day rates, as well as the impact these 33 ships will have as they come off storage duty.   

 I would be remiss if I didn't mention this myself, however, the numbers are telling me a different story.  First, the ships coming into the fleet aren't going anywhere without crews. Second, newer ships command better dayrates, so I expect the older ships will be anchored or relegated to storage duty to crew and make way for the newer ships, net/net a trade off.  PLUS, even the new ships will still burn fuel, only to comply with new environmental regs, that fuel will be the much more expensive diesel.  Watch, the computer programs will be working overtime to ensure not one drop of diesel is wasted --- so, again new ship, or not, don't expect to see it zipping along.

 AND when it comes to the global crude supply, think about this, the ships SLOWED down, it takes a lot longer to get the crude where ever you want it to go.   This IS a metric of the supply and demand equation.  The 'talking heads' never explained how the slowdown extended voyages and contributed to crude's climb to $147+.  The only way you can offset the extended voyage delay (bottleneck)  is to either reduce demand or add more ships, or both.   

   Try it out yourself.  Get in your car and drive to the mall and back at normal speed and TIME your trip.  Now go back at 25 mph and time the trip.  What's the difference?  

    That's where the analysts blew the call:

   (1) where the crews for the new ships are coming from,

   (2) how the slowdown had a measurable impact on the supply

   (3) the switch from bunker fuel to pricer diesel, which will be required of ALL shipping, not just the new ships will impact supply.

   (4) that the above factors WILL offset the new ships entering the market... 

   

 

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