Thursday, June 30, 2011

Statoil books VLCC to store oil in US Gulf, first in weeks

By Randy Fabi

SINGAPORE,(Reuters) - Norwegian energy firm Statoil has booked a Very Large Crude Carrier to store oil offshore in the U.S. Gulf of Mexico, the first such fixture for several weeks, shipbrokers said on Tuesday.

The VLCC, which can carry as much as 2 million barrels of crude oil, was booked for floating storage for 30 to 40 days at $32,000 per day, according to fixture reports.

Statoil will most likely store crude oil on the vessel, but could also be using it for fuel oil, said a Tokyo-based shipbroker.

It was not clear whether Statoil's fixture was a one-off move or the start of an industry-wide trend following a decision by industrialised nations last week to tap into their strategic petroleum reserves (SPR) for only the third time in history.

"Short term storage, in the form of charterers opting for two to three weeks of demurrage for cargoes already en route or fixed to the U.S. Gulf, can easily become profitable as the SPR sales near the end," said broker firm Charles R. Weber.

The freight market is watching closely for signs of a revival in floating storage demand, which hit a peak in 2009 during the oil market's super contango, to help soak up excess tonnage and boost shipping rates.

Brent crude futures LCOc1 joined its U.S. counterpart CLc1 into contango last week after the IEA said its members would release up to 60 million barrels of oil over the next 30 days.

The contango, a market structure where the front-month contract is cheaper than contracts for later delivery, was not steep enough yet to attract large interest for floating storage, analysts said.

"The differential on NYMEX, now showing a carry of about $6 a barrel out to August 2012, is not sufficient to induce a spree of VLCC charters for storage," said Barry Parker, a shipping analyst for Capital Link Shipping.

"This contrasts with early 2009 when ... you had far bigger differentials like $20 a barrel and higher to induce the carry trades," he added.

The head of Lloyds oil division told Reuters this month that the super contango of 2009 would likely recur again and could be an even bigger phenomenon next time around because of extensive investment in storage infrastructure. (Reporting by Randy Fabi; Editing by Ed Lane)

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