Rising inventories prompt buyers to favor floating storage
Forecasts indicate a significant increase in global oil inventories over the coming quarters, with the EIA projecting builds of 2.3 million barrels per day.
If onshore storage capacity tightens, buyers may once again turn to floating storage, as seen in 2020. At that time, up to 11% of the tanker fleet was employed for storage, driving VLCC spot rates to historic highs.
Positive impact expected for tanker earnings
According to Clarksons, every 100 million barrels placed in floating storage absorbs 2% of the global tanker fleet. Even if demand is centered on VLCCs, the reduction in overall vessel availability supports earnings across the broader market. With fundamentals already tight, analysts believe that storage demand could generate significant short-term upside and further extend the current period of elevated returns.
Sources: Clarksons, EIA, IEA, and TradeWinds