The global consumption of oil products has plummeted as a result of the outbreak of the COVID-19 and the consequential slump in the energy demand -particularly speaking of aviation, marine and automotive fuels- has caused an overall reduction of a 30% (i.e., about 30 MMbbl / day) in the demand of crude oil.
These circumstances converge with a significant increase of the oil production due to the inability of the oil producers to adapt to the current demand, as this oversupplied market is still driven by the still unsolved confrontation between Saudi Arabia and Russia, and the expectations of the recovery in demand by Q4 2020 – Q2 2021, causing, thus, a massive contango in an oil market where the dated prices are far below the forward ones; having the spread between the two exceded already USD 10 / bbl. Something unseen since 2009 and obviously posing a great opportunity for traders who seem to be literally stashing oil.
Once more, as the capacity of the onshore storage sites has been exceeded, the number of tankers running idle and used for the offshore storage of oil is rising, causing this also an increase in the ship-to-ship transfers, moving oil to tankers chartered at lower rates.
Except the context and the scale, there’s nothing really new in these practices which can partially compensate to shipowners the severe fall in the demand of transportation. However, it is necessary for owners to consider the importance of acknowledging about the Aggravated Risk posed by the change of use of a tanker from a vector of transportation into an offshore storage.
Things to keep in mind
Besides the importance of a safe anchorage and a careful watchkeeping, the possible cargo shortage and quality issues -relevant enough from a P&I perspective- and the breach of SOLAS that blending represents, it is very important for owners to be aware of the potential impact on their vessels such as the coating that the tanks can suffer -particularly as the tank washing is disrupted- and the hull fouling as a consequence of the prolonged stay of any vessel at anchorage.
On top of ensuring that both the corresponding Flag State and Class approve any possible arrangements conducted -besides the attendance of the surveys necessary for regular certification matters- it is important for shipowners to liaise with Coastal State as practices such as tank venting might be prohibited for health reasons.