*Could There be Another Storage Boom*
As the independent teapot refineries in the Chinese Shandong region increase their run rate, storage is once again reaching its limit. This greater run rate, is in attempt to de-congest the multiple VLCC’s waiting to discharge in Chinese waters. Demand for refined product is slowly starting to come online, however some products such as Kerosene are still at all-time lows. The nature of the refinery process means to make Gasoil (which is increasing in demand) Kerosene must be produced even though Kerosene has dramatically less demand. For these distillates such as Kerosene, that are less demanded but always produced, they need to be stored until demand comes back online. Refineries will be turning to the clean tanker market, that is still in a slump at cheap rates to store their products, resulting in an increased demand for short-term floating storage. This is good news for product tankers as demand is slowly increasing during the summer months, which is notably a season of lower demand, represented by TC5 hitting its yearly low of WS57.94 down from an average of WS165 year to date. Its estimated that around 60MMbl are in floating storage in product tankers globally and this is steadily increasing. This will help to bring confidence back to shipowners and the forward curve, which may cause a firmer uptrend in WS values on clean routes if demand for storage continues to rise.
*All eyes on OPEC*
OPEC+ members are meeting later this afternoon to discuss a potential tapering in supply cuts but is demand ready for this? The previous supply cuts helped to sustain oil prices, which were destined for the bottom, however producers have had enough of reducing their supply and will be discussing if the productions cuts can be reduced. If production does start to ramp up this is good news for the tanker market. Coincided with increased refinery action as mentioned above, tankers might see an increased demand to move crude and refined products or increased demand for floating storage, if end users do not need product immediately. It is estimated a 2-3m bpd increase in production will represent a 5-7% gain in seaborne trade. This should help to boost the VLCC market (TD3C) which seems to have stabilised at the low value of mid WS40’s, giving more power back to the shipowners, when charterers have predominantly had the helm in recent weeks.