LONDON (Reuters) - Traders have chartered at least five supertankers in the past day with options to store oil at sea as global stocks mount after the United States ditched plans to purchase oil for its emergency reserve, shipping sources said on Friday.
Shipping sources said the vessels – each of which can carry a maximum of 2 million barrels of oil - were booked for storage options of at least three months to take advantage of a widening contango market structure, when cargoes for short-term delivery are cheaper than those for later delivery.
In such instances, oil majors and trading houses charter ships to store oil they produce or buy cheaply from the market, betting they can resell at a profit when prices recover.
Trader Vitol was among the companies that booked storage options for ships, the sources said. Vitol declined to comment.
Storage included parking cargoes in the U.S. Gulf, the sources said.
The U.S. Department of Energy said on Thursday it has ditched plans to purchase crude for the nation's emergency reserve due to a lack of funding from Congress.
The purchases were seen as a way to absorb some of the global supply in crude markets caused by a crash in demand due to the spreading coronavirus pandemic and a flood of supply from top-producing countries.
The latest charters add to earlier bookings this month for storage at sea by oil players including Royal Dutch Shell and Glencore, sources have said.
"Activity is back, and owners are asking for much higher rates," broker Clarksons Platou Securities said in a note on Friday. "The driving force is the contango play soaking up tonnage."
Daily tanker rates have rocketed to record highs of $200,000 a day over the past two weeks and reached over $178,000 a day on Friday. Traders have to pay a premium for longer term charters.
The glut of oil in world markets has prompted efforts by oil players to find storage options including both on land and offshore on tankers.
(Reporting by Jonathan Saul, Julia Payne and Ron Bousso in London and Shu Zhang in Singapore; Editing by Elaine Hardcastle)