MOSCOW (MRC) -- A plunge in the volume of crude oil stored on ships combined with unexpected cuts from top producer Saudi Arabia have created a glut of vessels available for hire, pressuring the outlook for supertankers this year, reported Reuters.
Earnings for very large crude carriers (VLCCs) in 2020 reached record highs of more than USD240,000 a day as the coronavirus battered demand, creating an oil surplus and a scramble for storage on land and sea. Rates have since dropped to USD7,000 a day.
“Right now, it is really as bad as it gets for the VLCC market. Floating storage has more or less unwound and the return of that tonnage to the spot market has pressured rates,” Aristidis Alafouzos, chief operating officer of Okeanis Eco Tankers, told Reuters.
“The loss of 1 million bpd of Saudi production equates to annualised tanker demand destruction of 23 VLCCs.”
Clarksons Research Services estimated that as of Jan. 22, 95 vessels - the equivalent of 130 million barrels - were being used for storage versus a peak of over 290 million barrels in May last year.
IHS Markit said volumes on ships - also static for 14 or more days - had dropped to 52 million barrels, the lowest level since the peak in mid-2020 when it reached 190 million barrels.
“IHS Markit does not expect a repeat of last year’s explosive floating storage growth in 2021,” said principal lead analyst Fotios Katsoulas.
“Declining floating storage could further support oil prices in the near-term, as it is considered an indication for demand recovering.”
The numbers exclude Iran’s fleet holding oil and non-commercial longer-term storage by companies.
Demand for floating storage at the peak of the crisis last year was also driven by a market contango, a price structure whereby cargoes for delivery in the shorter term are cheaper than those for later delivery. It encourages traders to store fuel until prices pick up.
As MRC reported earlier, Saudi Arabia's "brilliant move" to unilaterally reduce oil output additionally by 1 million b/d has been a great contribution to the stabilization of the global oil market, said Kirill Dmitriev, the head of the Russian sovereign wealth fund RDIF, in his statement on Jan. 27.
We remind that in October 2019, McDermott International announced that it had been awarded a contract by Saudi Aramco and Total Raffinage Chimie (Total) for their joint venture (JV) Amiral steam cracker project at Jubail, Saudi Arabia. Amiral is a JV in which Aramco holds 62.5% and Total the rest. The plant, designed to produce 1.5 million metric tons/year (MMt/y) of ethylene, will be one of the world's largest mixed-feed crackers.
Aramco and Total launched their USD5-billion Amiral JV project in October 2018. The steam cracker will be fed with a mixture of 50% ethane and refinery off-gases. It will supply ethylene to a downstream 1 MMt/y polyethylene manufacturing complex and other petrochemical products. The project aims to fully exploit operational synergies with the adjacent refinery, owned by Satorp, another JV between Aramco and Total. Third-party investors, including Daelim and Ineos, will locate plants at the value park adjacent to Amiral with a combined investment of USD4 billion. A final investment decision is expected in 2021.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's DataScope report, PE imports to Russia decreased in January-November 2020 by 17% year on year and reached 569,900 tonnes. High density polyethylene (HDPE) accounted for the greatest reduction in imports. At the same time, PP imports into Russia increased by 21% year on year to about 202,000 tonnes in the first eleven months of 2020. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.
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