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Home » IANS » Oil Contango: Tanker rates rise even as dry bulk container fares drop

Oil Contango: Tanker rates rise even as dry bulk container fares drop

By IANS
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New Delhi, Sep 17 (IANS) Even as Covid-19 pandemic has impacted the charter rates of dry bulk and containers carriers, those for oil tankers have actually risen, said Crisil Research on Thursday.

Accordingly, charter rates of dry bulk and containers carriers have borne the brunt of the economic slowdown as demand dried up.

“Worse still, the outlook for these segments remains bearish for the rest of the year,” Crisil Research said in a report.

However, the circumstances has led to a phenomena known as ‘oil contango’.

“That’s because a crash in crude oil prices earlier this year had led to a situation known as ‘oil contango’, wherein the price of an oil futures contract exceeds the spot price,” the report said.

“This sparked a rush for booking vessels to be used as floating storage.”

Consequently, even as dry bulk and container rates wallowed, tanker charter rates were 44 per cent higher on-year in the first half of 2020.

As per the report, given that tanker segment constitutes a large chunk of the Indian fleet, the surge in tanker rates provides some cushion to a drop in revenue.

“However, the oil contango that made traders and countries rush towards floating storage is now tapering and rates are expected to be streamlined with the demand-supply dynamics of global trade,” the report said.

“We expect Indian shipping players’ revenue to decline 9-11 per cent due to reduced trade globally. A reduction in fuel costs will be of little advantage to the players because of low trade.”

–IANS

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(This story has not been edited by Newsd staff and is auto-generated from a syndicated feed.)
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