In what is being described as the latest sign of faltering demand that has triggered the biggest build up of stockpiles at sea since 2009, oil traders increased the fleet of ships deployed in the North Sea to store crude.

According to a survey of oil traders and ship-tracking data compiled by Bloomberg News, in May of this year, there was about 7 million barrels of the major North Sea crude grades in tankers off the U.K.’s coast which were awaiting to be offloaded and there are nine tankers which are holding about 9 million barrels of same now.

Noting up the highest storage since the 2008 to 2009 recession gave traders an incentive to hold supplies for later delivery, the volume of oil in storage on ships worldwide reached 95 million barrels at the end of June, said the International Energy Agency.

“Unlike 2009 when volumes at sea increased” because oil prices made the activity profitable, “today it is driven by logistical and marketing issues,” the Paris-based IEA said in its monthly report on Wednesday.

The recovery process for the oil sector would be a bumpy ride even as the accumulation of stockpiles shows that even as excess oil production is fading and global markets are re-balancing.

The use of gasoline in the U.S., the biggest oil user, has been indicated to have slowed down at a time when sales normally surge, claims a report from the Energy Information Administration on Wednesday. Based on this statistic, the report also states that the global fuel demand that had been spurred by low prices seems to be fading away.

Based on fears and concerns about oversupply after a government report showed U.S. gasoline inventories unexpectedly grew, the global price of oil tumbled a day ago. Brent futures dropped 4.6 percent to $46.26 a barrel and traded at $46.71.

A Bloomberg News report cites three traders who asked not to be identified who claim that due to a drop in demand for fuel, most of the cargoes floating idle in the North Sea have yet to find buyers and will probably remain where they are for some time. Maran Thetis which is a supertanker that is anchored off the east coast of England is one with the cargo that is in place for the longest time. This cargo and the cargo has been anchored on the water since April 23.

The contango isn’t wide enough to make stockpiling at sea profitable, said Ian Taylor, the chief executive officer of Vitol Group, the biggest independent oil trader, said in a Bloomberg television interview last week. The contango is the premium that is paid on future oil deliveries over current supplies. He said that amid unloading delays at some ports, it has become a necessity to make use of ships for storage.

(Adapted from Bloomberg)

Categories: Economy & Finance