Oil glut fuels demand for crude tankers as storage in boon for charter rates and Hong Kong shipowners
- A price war in global oil market has led to overproduction, creating demand for tankers as floating storage facility
- Demand has aided charter rates in a surprise lift for fleet owners in Hong Kong and elsewhere
The new use for oil tankers is a bright spot for the shipping industry suffering from a historic collapse in global trade amid the coronavirus pandemic. Dry bulk rates have fallen to unprofitable levels and container liners have blanked sailings to support prices amid the threat of global recession.
The glut in oil market means onshore oil storage facilities would be full in four weeks or sooner, according to Poten and Partners. Oil demand is likely to have fallen by 10.5 million barrels per day in March from 2019, the energy and shipping brokerage and consultancy said in an April 2 note. It will fall by 18.7 million barrels per day this month.
“We believe the tanker market will remain strong in the coming months,” said Zhou Jian-feng, managing director of Hong Kong-based Wah Kwong Maritime Transport, which owns several crude oil tankers. Tanker supply is tight due to demand for storage as oil traders bet on price rises, he added.
Global benchmark oil prices plunged on March 9 by the most in 30 years after Saudi Arabia said it would increase production even as global demand has slumped in the wake of the viral outbreak. Russia also declined to curb its output to protect its market share.
