Vessel-tracking data showed the amount of oil in floating storage was already picking up before the price war among oil producers officially began.
According to Kpler, 111m barrels were stored at sea as of 31 March, up 23m barrels from the level seen a month ago.
At least 55 dirty tankers were used as floating storage, including over 20 VLCCs, data from Braemar ACM suggested.
The development came as global oil inventories built up amid a collapse in fuel consumption due to the coronavirus pandemic.
Market players are expecting many more vessels to become floating storage in the coming months, with major oil producers failing to form any consensus on reducing supply.
Opec, Russia and nine other producers have allowed their long-running output cut of 1.7m barrels per day (bpd) to expire on Tuesday, setting the stage for large incremental supply in the oil market.
Tankers players – including Frontline and International Seaways – have predicted as many as 20m bpd of excess crude in April, which will quickly fill up onshore tanks storage and result in more floating storage.
“Oil supply from some producers (notably Saudi Arabia) is expected to increase in the coming months, and with oil prices having fallen significantly in recent weeks, there is potential for inventory building in some regions, and significant floating storage requirements,” Clarksons Research said.
“While enquiry has mainly been in the VLCC sector, interest has also materialised in the smaller crude segments, and in the LR and MR products sizes. Given the scale of potential oil surplus in the second quarter, the build in floating storage could well be very significant in the short term.”
According to Fearnley Securities, between 100 and 200 VLCCs could be booked for floating storage use over the next six to 12 months.
Last week, 15 VLCCs, 11 suezmaxes, five aframaxes and three LR1s were fixed on period charters, according to Bremar. Many of them are believed to be used as floating storage for some time.
The chartering spree prompted a rally in spot tanker trades, with Clarksons Platou Securities assessing global average VLCC earnings up 151.3% on week at $239,400 per day Wednesday morning, suezmax up 73% at $95,400 per day, and aframax up 2.8% at $48,000 per day.
“The large tonnage is taken out from trading, so the tonnage supply in spot trading is tight,” a Chinese owner said.
“As it will take some time for those vessels to return to the market, the tanker market momentum will last until the second half of 2020.”
