* About 6-8 LR2s being used to store gasoil
* Traders likely capitalising on gasoil contango
By Jessica Jaganathan and Keith Wallis
SINGAPORE, Dec 15 Traders are temporarily
storing gasoil on vessels in the waters off Singapore as they
anticipate demand for the fuel to go up in the coming months,
industry sources said on Thursday.
About six to eight long-range (LR) Aframax-sized vessels
which can carry up to 115,000 tonnes, or about 850,000 barrels,
each of gasoil are storing the industrial and power generation
fuel offshore for about one to three months, multiple trading
and shipping sources said.
Traders likely took advantage of a wide contango, where
prices for cargoes loading in the prompt month are lower than
those loading in forward months, and cheaper freight rates, the
"Yes, there is a contango in gasoil and several units have
been taken for storage," a European shipbroker said.
The price of a prompt Singapore gasoil swap dropped to a
discount of 63 cents a barrel to the second-month swap on Nov.
29, the widest in nine months, before narrowing slightly in
December, Reuters data showed.
Charterers of the vessels include Glencore's
shipping arm ST Shipping, oil major BP and trader Vitol
, the sources said, though this could not be
confirmed with the relevant companies.
ST Shipping is paying about $17,250 per day for a 30- to
90-day short-term charter, said Ashok Sharma, managing director
of shipbroker BRS Baxi Far East in Singapore.
The growing interest in vessels for storage helped push
Aframax spot charter rates to $26,000 per day in early December,
the highest level since March, according to data on the Reuters
Gasoil demand typically rises during winter for heating in
Europe, opening up arbitrage opportunities to ship the cargoes
from Asia, traders said.
"Some of the fixtures have options to ship the cargoes west,
so they can always take it off storage and bring it west once
market structure changes," a Singapore-based shipping source
A recent pick up in trading activity in the Singapore gasoil
market could also be boosting interest to store the fuel in
ships, traders added.
The volume of gasoil cash deals recorded during price
reporting agency Platts' pricing process rose to a record of
19.055 million barrels in November. The company's prices are
used as a benchmark for a majority of oil contracts in Asia.
In December, Glencore has bought over 3 million barrels of
500 parts-per-million sulphur gasoil for December loading from
Singapore, according to Reuters calculation based on trade data.
Vitol has snapped up about 4 million barrels and BP about 4.5
(Reporting by Jessica Jaganathan; Editing by Christian