A record 160 million barrels of oil has been stored in “supergiant” tankers outside the world’s largest seaports after the largest drop in oil demand in 25 years due to the coronavirus pandemic.
So-called “supertankers”, which can each hold up to 2 million barrels of oil, are in high demand by oil traders, as conventional oil storage facilities quickly filled with oil that remained unused during the closure of the coronavirus.
The last time floating storage hit levels close to this was in 2009, when traders stored more than 100 million barrels at sea before unloading stocks when the economy started to recover .
Charter rates for giant vessels that can be used to store oil have more than doubled in the past month to peaks at $ 350,000 (£ 280,000) per day as traders scramble to find space for crude oil which cannot be sold to refineries.
Shipping experts told Reuters news agency that 60 supertankers have been chartered to store oil, mainly off Singapore and on the US coast of the Gulf of Mexico, as well as smaller tankers.
The number rose rapidly from 25 to 40 super-large vessels at the start of the month, and 10 in February. The amount could triple in the coming months to fill up to 200 supertankers, according to shipping experts.
Commodity traders are looking for more space to store their crude oil, as demand for oil collapsed by 29 million barrels per day in April from last year, falling to lows never seen since 1995. Les Traders are expected to store the excess crude in the hope that it can be sold at a profit when demand for transportation fuels is restored later this year.
Falling demand has created an excess supply of 9 million barrels per day on the world market, which threatens to overwhelm the world’s traditional oil storage in a matter of weeks, according to S&P Global Platts Analytics.
Analysts expect “massive” increase in oil storage to between 500m and 1 billion barrels of oil from inventory levels in late February, which could fill global storage facilities to the brim by May .
This could trigger a collapse of the oil market at an average price of between $ 10 and $ 20 per barrel in the second quarter of the year – compared to around $ 65 per barrel at the start of the year – and force oil producers to close their wells.
S&P Global expects recovery in oil market to be “largely delayed” until next year, even after the world’s largest oil producers have concluded the most ambitious supply deal in the world history to reduce up to 20% of global supply from next month to alleviate the global glut.
“It may be too little and too late,” said S&P Global.