Helping crews and storage solutions

Inchcape Shipping Services | BPM-D

Just think about the history of the last hundred years – Spanish flu hit in 1918, two world wars, crisis in the Suez and famine in Africa. Through all of these very testing times Inchcape has been a dependable servant to the maritime community and continued to facilitate vital global trade. Black gold is often credited as the most important commodity in the world, fortunes have been made from it and wars fought over it.


Tanker shipping is vitally important to the world, both with crude oil and refined products. Without it many say the world would grind to a halt. But what about today? The reverse has happened! The shoe is on the other foot! Instead the world has in a way ground to a halt (or hopefully just paused) but oil, product refining and tanker shipping continue at a pace.


What is the consequence and how will big oil and the tanker market react and adapt? This is something we at Inchcape on the tanker side have been looking into. Before Covid-19 was so rampant a short lived oil war at the beginning of the year saw a dramatic increase in oil production and put much more oil into the market. Traders shorted oil and prices collapsed. “Oh no” some cried, but “oh yes” said many oil traders and refiners. It’s “contango” time once more – no not a fizzy drink, but it is a sort of dance.


As previously explained a blog or two ago contango is a trading term meaning that money can be made. Contango or the fact that the price for a commodity sometime in the future will be much more than it can be bought for today, really makes a trader and an oil refiner happy. Time to literally fill your boots with oil. So we started storing crude oil on ships at sea as many on shore facilities are already full or “at Tank Tops”. Greed is indeed good…or is it? Well it depends how far the oil price falls and as we have seen some have had to pay to have physical oil taken off their hands – someone got the sack there.


COVID-19 Disruption

Soon the oil markets ran into another problem and yes this was Covid-19 and the slow shut down of the world. No one really expected, that like me now writing this from my kitchen, the majority of the whole world would be put in detention at home. 

Capacity for all types of oil and oil products on shore is full, at tank tops and over spilling. Jet fuel, Gasoline, Naphtha is not being used and is clogging up refineries that you cannot just shut down overnight. 

During many agricultural crisis that we have seen, over production of milk was solved by pouring it away. Especially now days doing that with oil is frowned upon. Oil has to be stored and now there is nowhere else to do it except at sea on tankers.


The making of shipping magnets.


Tanker owners are not complaining. Shipping being a great example of a simple supply and demand market, loves this sort of situation. Before Covid-19 knocked the world for six, tanker markets were relatively good and at some points at the end of 2019 VLCC owners had been asking for up to $300,000 per day for the use of their ship. (Tensions in the Middle East Gulf and geopolitics). On a 45 day voyage such a TCE makes the Owner $13.5 million for a round trip. Sure, those dizzy heights did not last for long, but rates still fell back to very good historic levels.


A double positive. With more and more tankers of all types and denominations being attracted by charterers to store oil and oil products at sea, the tanker market is in an upward spiral. There is a finite number of tanker vessels of each type and this stock is getting depleted day by day as ships store oil or que up at ports and wait to discharge into terminals that are already full. Fewer tankers are in the open market for normal voyages, the bigger the squeeze on tonnage supply the more an owner can ask for the use of their ship with little competition, and so it goes on.


How can Inchcape help the tanker market at this time? Well as ever Inchcape have been in the thick of things. A major focus of ours has been the health and safety of maritime crews, which should be at the top of everyone’s list.


Both Inchcape’s global network and the fact we are the biggest pure port agent in the world helps shipping at all times, good and bad, and also throughout history. Inchcape is at your service and by your side 24/7 365, as shipping never sleeps, and is especially so at this time when the world again faces fresh challenges but also the opportunities these challenges bring. Today’s global crisis another challenge for Inchcape, especially to provide humanitarian aid and shipping know how to the maritime community. It is uncharted times, but also a challenge and one which we and our excellent staff all around the world rise to.


Keep safe, and we salute all or key workers on land, in hospitals and at sea.

Source: Jonny Hudson, Vice President Head of Tankers, ISS-Shipping

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