Bloomberg: Iran, OPEC’s second-biggest crude producer, expanded the number of supertankers being used to store surplus oil, echoing a program that contributed to a tripling of freight rates two years ago. By Alaric Nightingale
April 12 (Bloomberg) — Iran, OPEC’s second-biggest crude producer, expanded the number of supertankers being used to store surplus oil, echoing a program that contributed to a tripling of freight rates two years ago.
At least nine such vessels are idling in the Persian Gulf, Gulf of Oman and to the south of Egypt’s Suez Canal, according to data from the ships collected by AIS Live Ltd. Two months ago, there were three. Their depth in the water indicates they are loaded, with as many as 18 million barrels of oil being stored, almost enough to supply Europe for a day.
Refineries across Asia, accounting for almost two-thirds of global demand for supertankers, typically process less fuel in the second quarter to carry out maintenance. Two years ago, Iran used as many as 15 tankers for storage when demand from refiners fell, constricting vessel supply and helping to drive up freight rates more than 200 percent in less than three months.
“This kind of development can be a psychological trigger for the market,” said Per Mansson, managing director of Nor Ocean Stockholm AB. The supply of ships “is already about equal to demand, and this can rapidly alter sentiment.”
National Iranian Tanker Co., which operates the nine supertankers, also has a laden suezmax tanker idling off Iran, ship-tracking data show. A suezmax can hold about 1 million barrels of oil. Four of the supertankers are off Iran, three are near the United Arab Emirates in the Gulf of Oman and two are south of the Suez Canal.
“Any capacity being taken out of the market is reducing the fleet and should have a positive effect,” Dag Kilen, an analyst at RS Platou Capital Markets A/S in Oslo, said by phone. The number of Iranian tankers being used for storage this year is about double the average, he said.
Calls today to the office of Seifollah Jashnsaz, managing director of National Iranian Oil Co., weren’t answered. The office of Deputy Oil Minister Hossein Noghrekar Shirazi referred calls to NIOC’s office of international affairs. Ali Asghar Arshi, the company’s manager of international affairs, wasn’t immediately available for comment, his office said. Mohammad Souri, managing director of National Iranian Tanker, wasn’t immediately available for comment, his office said.
Demand for Iran’s sulfur-rich crude has weakened as refineries that can process the fuel shut down for maintenance. The discount on Iran Heavy crude compared with Oman and Dubai petroleum is at its widest in more than a year, according to data compiled by Bloomberg. The discounts on Iran’s Forozan, Soroosh and Norooz crudes have also widened.
Iranian oil production expanded 0.8 percent last month to almost 3.83 million barrels a day, data compiled by Bloomberg show. That’s in contrast to the combined 12 members of the Organization of Petroleum Exporting Countries, accounting for about 40 percent of global supply, who kept output little changed in March, the data show.
Iran’s tankers have idled since at least March 19, the ship-tracking data show. A normal turnaround for a supertanker taking on a cargo would be one or two days, said Halvor Ellefsen, a tanker broker at SeaLeague AS in Oslo.
Iran’s expanding oil storage runs contrary to what is happening globally. The number of tankers tied up in storage fell to 104 by the end of February, from a record 168 in November, according to Simpson, Spence & Young Ltd., the world’s second-largest shipbroker. There were 18 supertankers storing.
Stored on Tankers
Traders had bought crude, stored it on tankers and sold the fuel for delivery in the next several months. Those trades unwound after the premium for later delivery was eroded.
Iran’s storage may bolster freight rates and prompt traders to revise their expectations for the second quarter. Rates on the benchmark Saudi Arabia-to-Japan route will average $28,758 a day in the period, according to the median in a Bloomberg survey of 13 analysts, traders and shipbrokers at the end of March. That’s 49 percent less than the rate of $56,246 on April 9, according to prices from the Baltic Exchange in London.
Higher freight rates could bolster earnings for shipping lines including Hamilton, Bermuda-based Frontline Ltd., the biggest operator of the vessels. The six-member Bloomberg Tanker Index of shipping stocks advanced 14 percent this year, more than the 5.1 percent gain in the MSCI World Index of 23 developed nations’ equities.
The absence of Iranian tankers from the market would also compound an expected contraction in the global fleet this year as a ban on single-hulled vessels takes hold. The fleet will shrink 4.2 percent this year, according to Clarkson Research Services Ltd., a unit of the world’s largest shipbroker.
Ship name Location Since Capacity
Najm Assaluyeh Jan. 4 2 million
Haraz UAE Jan. 5 2 million
Honar Assaluyeh Jan. 31 2 million
Harsin Suez March 5 2 million
Noor Suez March 9 2 million
Huwayzeh UAE March 9 2 million
Danesh Assaluyeh March 12 2 million
Darab UAE March 15 2 million
Sarv Assaluyeh March 17 1 million
Dadgar Assaluyeh March 19 2 million