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SINGAPORE, March 11 (Reuters) - Saudi Arabia’s National Shipping firm, Bahri, has tentatively chartered as many as 14 super-tankers to ship crude oil to customers worldwide, as the Kingdom follows through with its promise to boost crude oil output.
“VLCC’s provisionally hired in the spot market for quite prompt dates – 10 days to 2 weeks forward – have surged over the course of the last two days,” said Anoop Singh, head of tanker research in Asia at Braemar ACM Shipbroking.
The spike in bookings by Bahri has helped to more than double the charter rates for very large crude-oil carriers (VLCC) amid this week’s ‘fixing frenzy’, shipping sources said.
The bookings by Bahri are in addition to its own fleet of 42 VLCC’s which it mainly uses to ship Saudi oil to customers across the world, the sources said.
VLCC tanker rates along the Middle East Gulf to China route have more than doubled to over $100,000 per day on Wednesday, up from about $30,000-$40,000 per day on Monday, according to several ship broking sources.
Saudi’s state oil giant Aramco said on Tuesday it would boost oil supplies to a record 12.3 million barrels per day (bpd) in April, or 300,000 bpd above its maximum production capacity.
On Friday, the Organization of the Petroleum Exporting Countries and its allies, including Russia, - together known as OPEC+ - failed to reach an agreement for deeper production cuts to support prices hit by the coronavirus outbreak, sending global oil prices plunging and threatening to overwhelm global oil markets with supply.
In February, freight rates plunged nearly in half as the spreading coronavirus hit demand for crude oil in China, the world’s top importer, and after the U.S. partially lifted sanctions on one unit of Chinese shipping firm COSCO.
But as worries about the economic fallout from the coronavirus outbreak and its impact on energy demand continue to weigh, some of the increased Saudi exports may be destined for storage.
Some crude volumes onboard the West-bound tankers fixed by Bahri, which were about half of the ships it booked this week, “are likely to be headed straight into storage,” said Singh.
As tanker rates jump, the prospects of storing the flood of oil supplies onboard tankers is also quickly becoming uneconomical, the shipping sources said.
“The 3-month contango (structure in crude oil) is about $1.5 per barrel, while a three-month floating storage would cost 50% more than that even on the cheapest of vessels,” said Singh.
Floating storage is incentivised by the structure of the forward price curve, known as contango, where future supplies for are more expensive than those for immediate delivery.
Reporting by Roslan Khasawneh, Shu Zhang and Jessica Jaganathan; Editing by Kim Coghill and Louise Heavens