Glencore's ST Shipping and Transport has reportedly fixed a VLCC from Litasco in a surprise storage deal with Litasco.
Lukoil’s trading arm relet the 298,564-dwt DHT Lake (built 2004) to ST Shipping for 30 to 90 days at $25,000 per day, brokers reported.
The ship is said to be used to store oil off Singapore.
In April, DHT Holdings announced it chartered out the VLCC along with five others for at least 12 months at an average rate of $67,300 per day.
The shipowner did not disclose who chartered the DHL Lake, but industry databases suggested Litasco took the vessel then.
Glencore declined to comment on the fixture. TradeWinds has approached Lukoil for comment.
The relet was believed to be priced in line with the market level, but some players were surprised that the ship would be used as floating storage.
“The contango is not there, so it’s quite interesting the charterer is doing a storage deal,” said a broker, referring the term for a market where future prices higher than spot oil prices.
Despite renewed oil demand worries amid the second wave of coronavirus pandemic, the crude price contango has remained narrow as major producers keeping exports at low levels.
This has provided few incentives for most oil firms to maintain high stocks.
Kpler data showed 122m barrels of crude were stored at sea for seven days or longer as of Thursday, down from 148m barrels at the beginning of September.
However, analysts at S&P Global Platts suggested oil producers or term barrel holders could look at floating storage deals due to high costs onshore.
A three-month VLCC charter at $25,000 per day would be equivalent to storage costs of 30 cents per barrel every month, according to a note from Platts Analytics. This compares with monthly onshore storage costs between 35 and 45 cents per barrel.
“We believe short-term floating agreements can be executed at very competitive levels relative to the cost of onshore storage,” the note said.
