Sea Storage Plays Feeds Bloated Oil Market

By Reuters 2015-06-04 13:54:09

Physical oil is coming under pressure as trade houses unwind a profitable storage play after several months that saw them holding millions of barrels on tankers at sea.

A drop in the volume of crude stored for speculative profit is putting more supply into an already saturated market, elbowing out new loadings leading to a build-up of unsold West African, North Sea and Mediterranean oil.

“When the contango started, it created a demand,” said Tamas Varga of PVM oil brokerage. Now “they are creating additional supply”.

“The structure of the market should weaken significantly,” Varga added. “There is just lots of oil around in the U.S. and globally.”

Oil prices collapsed by 60 percent between June last year and January 2015, pushing the cost of oil for immediate delivery to a big discount below future prices and making it profitable to buy oil and store it for sale later.

At its peak earlier this year as much as 50 million barrels of oil was estimated to have been earmarked for storage on tankers. The oil market has since rallied – flattening that discount, also known as a contango, leading trade houses to cash in on profits.

Shipping sources and shipping data estimated that volumes earmarked for contango-led floating storage had dropped to as few as 10 tankers, known as very large crude carriers, each capable of carrying a maximum of 2 million barrels, meaning at most 20 million barrels.

“We’re getting to the point where it makes sense to sell,” Richard Mallinson, analyst with Energy Aspects.

“Effectively, we’re reaching the end of that storage.”

In the past week alone as much as 5 million barrels of floating storage has been sold, shipping data showed.

In an earlier sale last month, Chinese trader Unipec sold 2 million barrels of Nigerian crude that was stored on one of the world’s largest tankers, capable of holding 3 million barrels, to an Indian refiner.

Trade sources said trading firms such as Trafigura and Vitol as well as Shell had all sold cargoes held in floating storage.

The companies declined to comment when contacted by Reuters.

“If you want to recreate the contango trade, you need a steep drop … in the oil price to make it viable given where tanker rates are today,” said Arctic Securities analyst Erik Nikolai Stavseth.

Mallinson contends that the long-term effect may be a drop in the market surplus of crude oil, but in the near-term, it adds to the oversupply:

“It makes the pain worse in the short term,” he said.

Nevertheless, for holders of millions of barrels of West African crude and also North Sea oil in the Atlantic, the sell-off in floating storage could mean a longer wait to offload cargoes as they compete. “Everyone is trying to sell,” one oil trader said.

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Singapore Named Most Important Maritime Capital

By Kathryn Stone 2015-06-04 13:26:05

Singapore tops the list as the most important maritime capitals for 2015, according to a new report released by Menon Business Economics today.

The Asian capital was listed as number one based on a combination of objective indicators derived from public data sources as well as a survey of 200 industry experts from over 33 countries.

The report analyses 15 leading maritime cities based on shipping, finance and law, technology, and ports and logistics. It also takes into account competitiveness and attractiveness to maritime companies. The complete top five maritime capitals listing is shown below with important area highlights.

Singapore

Singapore was cited as the number one most important maritime capital. It is located in a pivotal geographic location near important markets. It was ranked first for ports and logistics and second for finance/law and shipping. Singapore is home to the fourth largest fleet and is an important center for commercial management. The city has also been successful at attracting a wide variety of global companies.

Hamburg

Hamburg earned its place near the top of the list by being very strong in the area of maritime technology. It scored very high expert marks in the areas of R&D/ Education, Maritime Equipment, IT services. Additionally, Germany is home to companies such as Caterpillar Marine Power Systems and Man, making the country a highly important maritime equipment center.

Oslo

Oslo landed the third most important spot largely because of its significance in the field of maritime technology. The city was ranked number one in this area largely because the overall importance of Norway as a maritime technology center. DNV GL one of the world leaders in the field, is headquartered out of Oslo. The city also gets high marks in the area of maritime finance.

Hong Kong and Shanghai

Hong Kong and Shanghai took the fourth and fifth positions respectively. China has the world’s second largest economy and has been showed growing influence in world market. The country has one of the world’s largest shipbuilding industries and is home to six of the world’s ten largest ports. The experts surveyed anticipate Shanghai becoming the second most important maritime city by 2020.

Other Notable Findings

Asia as a whole is gaining increasing control of the maritime market. The Philippines recently overtook European nations as the fourth largest shipbuilder and Manila and Jakarta continue to grow in importance for the maritime segment in the region.

In the Middle East Dubai is predicted to become a maritime leader.

Also, Brazil is investing heavily in new ship orders particularly in the offshore segment. The country currently accounts for only 1% of the world fleet, but it holds 7% of the world’s orderbook.

The complete report can be accessed here

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US LPG exports accelerate

Despite volatile oil prices, US LPG export volumes are exceeding expectations and destinations are shifting, according to Dorian LPG.
On 4 June, the NYSE-listed owner reported a net income of USD8.8 million for its fourth quarter (which ended on 31 March 2015) versus a loss of USD1.3 million in the
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Shipping Company Sentenced for Second Environmental Offense

By Kathryn Stone 2015-06-04 11:25:50

A German shipping company has been ordered to pay $750,000 in fines and community service payments for a second oily water discharge offense.

Herm. Dauelsberg GmbH and Co. KG, of Germany was already on criminal probation for a 2013 case related to environmental violations aboard the M/V Bellavia off of California. A U.S. District Court has ordered the company to serve an additional 3 years’ probation for the latest infractions.

In January of this year a corroded bulk head aboard the Liberian-flagged M/V Lindavia, caused around 36,000 gallons of heavy fuel to leak into the ship’s hold. The cargo vessel was sent on to South Korea for cleaning, but not all the fuel was recovered.

For several days beginning Jan-31 the crew of the Lindavia pumped 1,430 gallons of oily water from the hold into 55 gallon drums on the upper deck. From there, crew members dumped the waste into the Bering Sea.

On February 11 the crew disposed of an additional 350 gallons of the oil water about 100 miles off the coast of Dutch Harbor, Alaska. Coast Guard inspectors came aboard the Lindavia after the captain reported damage to navigational lights and a radar system. The inspectors become aware of the environmental crimes and ordered that the ship be detained in Dutch Harbor.

Following the June 3 judgement, the company must create an ‘environmental compliance plan’, which includes ship wide protocols for the company’s seven vessels operating in U.S. waters. Ships owned by the German company will also be subject to warrantless searches if there is suspicion a vessel has violated the law.

Wednesday’s judgement is the second passed down Alaska Federal Court in a ten day period. Another Germany company, AML Ship Management GMBH, was sentenced to pay $800,000 May 26 for discharging over 4,500 gallons of oily water.

The prosecutor for the two recent cases, First Assistant U.S. Attorney Kevin Feldis, has noted that oil pollution continues to be a worldwide problem even in 2015. In a written statement Feldis said, “there is no excuse for this conduct. Companies that seek to profit from transporting cargo across the world’s oceans have a responsibility to likewise invest in following the law.”

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Tanker not cause of Indonesia oil spill

Enigma surrounds an oil spill that occurred in Indonesia’s Penyu Bay on 20 May.
Until today, no one can say for certain what caused the oil spill.
Indonesia’s state-owned oil company Pertamina initially thought the oil leak occurred when product tanker Martha Petrol, which had been trading in
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