Ships able to carry 2m barrels chartered for $335,000 a day to store oil unwanted during the Covid-19 pandemic

Giant oil tankers are being used to hold record amounts of crude at sea due to a global oversupply that threatens to overwhelm the world’s storage facilities.

A record 160m barrels of oil has been stored in “supergiant” oil tankers outside the world’s largest shipping ports following the deepest fall in oil demand in 25 years because of the coronavirus pandemic.

The so-called “supertankers”, which can each hold up to 2m barrels of oil, are in high demand by oil traders as conventional oil storage facilities have quickly filled up with oil left unused during the coronavirus lockdown.

The last time floating storage reached levels close to this was in 2009, when traders stored more than 100m barrels at sea before offloading stocks when the economy began to recover.

Charter rates for giant vessels that can be used to store oil have more than doubled in the last month to reach highs of $350,000 (£280,000) a day as traders scramble to find space for crude that cannot be sold on to refineries.

Shipping experts told the Reuters news agency that 60 supertankers have been chartered to store oil, mostly off the coast of Singapore and in the US gulf coast, as well as smaller crude oil tankers.

The number has climbed quickly from between 25 and 40 super-large vessels at the start of the month, and 10 in February. The amount may triple in the coming months to fill up to 200 supertankers, according to the shipping experts.

Commodity traders are hunting for extra space to store their crude as demand for oil collapses by 29m barrels per day in April compared with last year, falling to lows not seen since 1995. The traders are understood to be storing the excess crude in the hope it can be sold at a profit when demand for transport fuels returns later this year.

The slump in demand has created an oversupply of 9m barrels a day in the global market which threatens to swamp the world’s traditional oil storage within weeks, according to S&P Global Platts Analytics.

The analysts expect a “massive” increase in oil storage of between 500m to 1bn barrels of oil compared with stock levels at the end of February, which could fill global storage facilities to the brim by May.

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This could trigger an oil market collapse to an average price of between $10 to $20 a barrel in the second quarter of the year – from about $65 a barrel at the start of the year – and force oil producers to shut their wells.

S&P Global expects an oil market recovery to be “largely delayed” until next year even after the world’s largest oil producers struck the most ambitious supply deal in history to cut up to 20% of world’s output from next month to ease the global glut.

“This may be too little and too late,” S&P Global said.