Oil contango boosts crude storage at sea-sources
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* Offshore storage pegged at 60-100 million barrels
* Offshore storage up 10 million barrels in last 2 weeks
* Crude storage interest focused on U.S. Gulf
* Appetite to lease vessels growing
By Joshua Schneyer and Jonathan Saul
NEW YORK/LONDON, Aug 7 (Reuters) - The amount of crude oil being stored at sea has risen sharply over the last two weeks, particularly in the U.S. Gulf, due to a price incentive for oil companies to hold stocks on board vessels, traders and analysts said on Friday.
Several industry sources estimated that there were 70 million barrels of oil being stored at sea. While the estimates vary from around 60 million to 100 million barrels, most sources agree offshore storage levels rose by around 10 million barrels in the last two weeks alone.
A Very Large Crude Carrier (VLCC) can store up to two million barrels of crude oil.
"We have seen renewed interest in chartering VLCCs for storing crude oil of late, which we believe has been stimulated by the widening of the contango in WTI futures," said Simon Chattrabhuti, head of tanker research with ICAP Shipping in London.
An oil price structure known as a contango has encouraged oil companies to store crude oil in tankers anchored at sea this year with a view to selling it for a profit later.
The contango price structure -- which occurs when oil for prompt delivery is discounted to oil for delivery further in the future -- has narrowed over the last few weeks for North Sea crudes, but remains attractive for many U.S. grades, making it most profitable to store oil near the U.S. Gulf Coast.
West Texas Intermediate crude futures CLc1 for delivery next month have been trading at around a $2.00 a barrel discount to barrels for delivery in two months, more than covering the cost of around $1.00 a month of storing a barrel offshore in the United States.
"The storage total is probably close to 70 million barrels, with the majority of the rise is in the U.S. Gulf," said George Los, an analyst with U.S. shipbrokers C.R. Weber.
Offshore storage dipped to 60 million barrels in late July, as the contango weakened, Los said. The recent levels of floating crude stocks are still well below peaks of more than 100 million barrels in April, he added.
Another U.S. shipbroker, who requested anonymity, counted five new VLCC storage charters over the past nine days alone. They included European trader Trafigura, Russian trader Gunvor and U.S. oil major ConocoPhillip (COP.N) charters, all for crude oil storage off the U.S. Gulf Coast. She estimated 70 million barrels currently at sea.
Among the other players currently storing contango crude are U.S. trader Koch, major Royal Dutch Shell (RDSa.L) and Swiss trader Vitol, the broker said. Continued...prt2 at link
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