The bulk of VLCCs and other tankers booked for storage in recent weeks are only now beginning to actually fill their tanks.
And some vessels have been taking advantage of a time lag between fixing and loading to compete in a strong spot market.
"We're actually right now beginning to fill up the storage," Frontline Management commercial director Lars Barstad said on a Signal Group webinar.
"A lot of people think that the minute we fix, the storage starts; it doesn't, there is a long lead time."
The bulk of ships booked for six or 12-month deals are loading now in the next windows, he added.
"So that's when we're going to see these ships commit," said Barstad, whose John Fredriksen-controlled company is a major tanker owner.
He added there had been some vessels secured on time charters for storage in the first round of fixing that "have actually competed in the spot market, not filling up any cargoes at all".
This is a sign of traders who are being opportunistic in the freight market, Barstad said.
"I don't think we've seen the real effect of storage," he said.
Similar story for onshore storage
Florian Thaler, oil strategist, chief executive and co-founder of analyst OilX, backed up this view from the point of view of onshore storage.
"When the media reports big storage hubs like Saldahna Bay in South Africa being fully booked, that does not mean fully filled," he said.
"We are seeing the same in the Caribbean and Sweden. We still have quite a few suezmaxes pointing to Saldahna Bay, so it's testimony that they might be fully booked, but not all transactions are physically happening already — a bit of disconnect in timing and the logistics involved."
Joseph Tzardis, chief chief commercial officer of Greek tanker owner Prime Marine, said it is unclear what will happen when the storage positions start to unwind.
When this does start to occur, Barstad insisted the "fundamental outlook" appears much better now than in previous cycles due to the low orderbook, and the resultant shrinking of the fleet over the next two years.
'Rates unsustainable'
He added that with LR2 product tanker rates at a third or half the value of the cargo they are carrying, the situation is not sustainable.
"If you see $200,000 on an LR2, you can't expect it to go much further for a longer period of time, you have to be a little bit more modest than that," Barstad said.
"And the same goes for VLCCs as well. We've seen it all the time, when the rates reach a certain level of the value of the cargo, then things tend to stop."
But he said this is a market environment in which tanker owners can make plenty of money over the next few months
LR2s look the most exciting
With output cuts starting in May, Barstad said the trade from the Middle East to Asia will be "hurt".
"It's natural then to think that maybe the demand, which is still okay, will have to reach further for barrels, which again favours the VLCC segment," he said.
"I'm not too worried about the VLCCs. I'm probably a little bit more worried about the suezmax segment. For us, that is more or less an Atlantic or Western market."
Barstad added that Russian oil supply cuts have brought some challenges for dirty aframaxes, creating an incentive to switch to clean trading.
"I'm extremely positive about the aframax and LR2 space," he said. "We are just at the start of severe refinery run cuts."
"We're over-producing a lot of products, particularly jet, and this is going to create arbitrages between refining sectors and global regions, which will make that market quite exciting for the longer term."
Barstad added said that "interesting things" might happen in the LR2 segment over the next quarter.
LR2s 'lost it'
Tzardis said LR2 supply basically evaporated in early April, coinciding with the return of Middle East production after maintenance in the first quarter.
"After they came back, they found they could sell cheap products and tonnage was thin," he said.
A second shock came when West Texas Intermediate oil prices slumped to negative figures on 20 April.
"On April 21 and 22, the clean market completely lost it," he said.
"We were looking at reports whereby freight was probably a third of the cargo value, which we've never seen before. It was a perfect star alignment due to the motivation to move barrels."
