Oil Tankers Drag Out Sailing Times as Surplus Snarls Ports

When the supertanker New Vigorous arrived at
the port of Antifer in northern France last Saturday, it made a
small bit of maritime history.
The vessel, laden with 2 million barrels of crude, became
the first in almost two years to make the voyage from Saudi
Arabia to northwest Europe via South Africa’s Cape of Good Hope
— a journey that takes almost twice the time as the usual route
through the Suez Canal. Now at least two more supertankers are
doing the same.
As the coronavirus pandemic turns the oil market on its
head, it’s also sending shockwaves through the shipping
industry. From California to Gibraltar, tankers have piled up as
suppliers deal with the largest glut the world has ever seen and
ports have become congested. With storage options running out,
fuel at historically low prices and the value of cargoes almost
certain to rise in the future, some ships are taking rare
voyages, often prolonging their routes until more favorable
conditions arise.
“Everyone is seeking to postpone the delivery of cargoes,”
as storage fills up said Peter Sand, chief shipping analyst at
industry group BIMCO. “Right now, in combination with very low
fuel prices, it does make sense to bring ships around the Cape
of Good Hope.”
Two weeks after the New Vigorous set sail for France,
another supertanker, the New Harmony, embarked on the same route
around Africa, vessel-tracking data compiled by Bloomberg show.
Two weeks after that, a third ship, the New Pioneer, did the
same.
There are other sporadic instances of long-distance
voyages. Oil tankers from Europe don’t normally sail around the
tip of South America, but last month the Psara I did so on its
way to delivering the first Norwegian crude to the U.S. West
Coast in 11 years.
The Trident Liberty is the first-ever supertanker to load
Kurdish crude at Ceyhan on Turkey’s Mediterranean coast and haul
it, probably to China, around the coast of Africa. Cargoes to
China normally move on smaller ships through the Suez Canal.
The precise motives of the moves aren’t known, but there
are some well-known issues in the oil market that support slower
deliveries. In Europe alone, the amount of crude in floating
storage is now at a record 28.9 million barrels, according to
ship-tracking firm Vortexa Ltd. At the same time, traders are
grappling with a market condition known as contango, where near-
term prices are lower than those further out.
“Things have changed since the oil glut and wide contango
started to dominate the markets,” said Burak Cetinok, head of
research at Arrow Shipbroking Group in London.
Tankers used to speed up when laden with cargo and slow
down when they were empty to save money on fuel charges, he
said. Now, he’s seeing the opposite. “They’ve started slowing
down when laden because there’s a very limited space to
discharge, and wide contango makes the cargo more valuable at a
later date.”

Round the Cape

Perhaps nowhere is the effect of the market upheaval more
obvious than in the voyage around the Cape of Good Hope. In
addition to the three crude-laden vessels that have sailed the
route in recent weeks, the oil-product tanker BW Triton has also
gone around South Africa from an East-of-Suez origin, tanker-
tracking shows. At least two others were initially bound for
Europe but instead diverted to West Africa.
“If you can delay your delivery then you could stand to
make more money from your cargo than you would have if you
rushed to deliver it as soon as possible,” said Vortexa senior
analyst Jay Maroo, speaking about products tankers.
Supertankers are too big to pass through the Suez Canal
with a full cargo, so they generally discharge at a pipeline
terminal near the Red Sea end of the waterway and re-load once
they reach the Mediterranean. For a voyage from the Persian Gulf
to northwest Europe, the journey usually takes a little more
than three weeks.
BIMCO’s Sand said that with fuel costs so low, it’s perhaps
cheaper to avoid the canal — where tolls can run into the
hundreds of thousand of dollars — even if the journey is
longer. In recent weeks, the canal has temporarily increased the
rebates it grants for some ships, though not for oil tankers.
“For the time being there isn’t any change in crude
tankers’ fees,” said Suez Canal Authority spokesman George
Safwat. “Once we notice any drop in the number of vessels, we’re
open to all scenarios.”

(Bloomberg) —