A CHARTERING rush set in after oil traded at negative levels in the US and the true scale of the crude oversupply emerged, with traders seeking tankers for floating storage of jet fuel, diesel and gasoline.

Egypt’s national oil company provisionally agreed to charter a very large crude carrier earlier this week in a deal that would be worth the equivalent of $356,798 per day — a record high.

The Egyptian General Petroleum Corporation will hire the 2019-built and scrubber-fitted Hunter Laga for a Middle East Gulf to Red Sea voyage for 265 points on the Worldscale, according to VLCC pool Tankers International.

That translates to $308,226 in actual time charter equivalent and $356,798 for the round voyage TCE, the measurement used by TI to compare charter contracts between different vessels. The deal is subject to approval.

Earlier this year, Saudi Arabia’s national shipping firm Bahri set the record for highest VLCC spot charter rate, with a $352,000 daily payment for the 2012-built Sea Splendor.

The Egyptian charter comes at a time when, under normal circumstances, rates would be expected to drop, as global oil demand shrinks on account of the coronavirus-led economic shutdown and oil producers cut back on output.

However, an oversupply of oil and limited land storage has made floating storage on tankers for jet fuel, diesel and gasoline economically viable.

While daily charter rates for VLCCs have dipped slightly in the past couple of days, as expected due to storage filling up, they are still tracking at historically high rates in particular on Middle-East to Asia routes.

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The same picture can be seen with forward freight agreements for VLCCs, which jumped in value by as much as 52% in the past week but have mirrored the falls seen in the spot market since midweek.

Again, the increase in FFAs for VLCCs reflects the anticipated demand for tankers as floating storage and the expected decline in elevated spot charters.

After a steep rise earlier in the week, FFAs started to fall back on Wednesday when oil prices recorded rare gains in part after US president Donald Trump threatened the US would shoot at Iranian gunboats, but continue to be at elevated levels.

Meanwhile, the chaos in the crude markets is spilling into product tanker markets, with earnings now above $150,000 daily for aframax-sized vessels.

The accelerating surplus of air and land transport fuels amid a lack of land-based storage is also leading to discharge delays at ports and increased volumes of distressed cargoes, compounding vessel availability on the spot market.

Rates for long range tankers doubled in two days on benchmark routes, while medium-range tankers plying transatlantic trades are 186% higher than last week, at nearly $88,000 daily according to the Baltic Exchange.

At the same time, prices for jet fuel, diesel and gasoline plunged to 20-year lows on April 21, leaving freight costs on some of the busiest routes comprising nearly a quarter of total delivered prices.

Floating storage economics also indicate significant profits for these fuels, based on information complied by Lloyd’s List, adding to skyrocketing demand for aframax and panamax product tankers.

This generation of oil traders have never seen such off-the-scale volatility and bizarre costing assessments, Lloyd’s List was told.

Dover ferry traffic

Finally, first-quarter-of-the-year traffic data for the Strait of Dover shows the impact of the coronavirus crisis on the Dover ferry and Eurotunnel shuttle operations.

The corridor lost 18% of passenger and 13% of freight volume over the quarter compared with the same period a year earlier, mainly because of the health crisis and the consequent introduction of restrictions on passenger travel and some reduction in demand for international freight in March 2020.

The Dover ferry services lost 25% of their passenger vehicle traffic compared with the first quarter of 2019, whereas Eurotunnel only lost 18%.

In January and February, Eurotunnel had increased passenger vehicle volumes compared with 2019, but then lost 46% of its passenger vehicle traffic last month, highlighting the dramatic impact of the restrictions that came into force on all but essential travel between the UK and France in March.