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By Jonathan Saul and Devika Krishna Kumar
LONDON/NEW YORK April 27 (Reuters) - Oil traders are hiring expensive U.S. vessels, normally only used for domestic shipments, to store gasoline or ship fuel overseas, five shipping sources said, in a sign of the energy industry’s desperation for places to park petroleum amid a 30% drop in worldwide demand.
Billions of people worldwide are living under confinement rules due to the coronavirus pandemic, destroying demand for gasoline and other fuels and creating a supply glut. Storage tanks onshore and floating storage in tankers on the water are rapidly filling, leaving fewer options for traders looking to sock away oil.
Several shippers said they have started to book Jones Act (JA) vessels for foreign voyages or to store refined products. The century-old Jones Act requires that vessels traveling between domestic ports be owned and operated by U.S. crews, and they are generally more expensive than other vessels.
“It’s very unusual to use JA tankers for international trips,” one shipping source said.
Those restrictions, and lack of availability, typically make the tankers more expensive than foreign-flagged vessels that go to other countries. Around 45 products tankers are JA compliant, shipping data reviewed by Reuters showed.
Rates for foreign-flagged fuel tankers such as medium-range and long-range vessels leaving from the United States have jumped to about $60,000 and a record $100,000 a day, compared with Jones Act medium-range tanker rates of about $55,000 to$70,000 a day, the sources said. (Reporting by Devika Krishna Kumar in New York and Jonathan Saul in London, Editing by Franklin Paul and Leslie Adler)