There are 27 oil tanker vessels with more than 20 million barrels of crude anchored off the coast of Southern California, waiting to offload their cargoes as coronavirus pandemic shatters demand for oil.
“Due to the unique nature of this situation, the U.S. Coast Guard is constantly evaluating and adapting our procedures to ensure the safety of the vessels at anchor and the protection of the surrounding environment,” said Cmdr. Marshall Newberry, from Coast Guard Sector Los Angeles/Long Beach.
“Coast Guard watchstanders, in partnership with the Marine Exchange of Southern California, are closely monitoring each anchorage to manage the increased number of tank vessels we’re seeing off the California coast.”
The onslaught of ships is currently serving as floating storage for days amid lockdown measures that have closed down refineries, and reduced road and air traffic.
Floating storage has been in growing demand as onshore storage fills up amid continuous oil production.
According to Paris-based Kpler SAS, as of Aril 20, on a global scale onshore crude storage sits just below 3.5bn barrels and floating storage is at 153 mb. There has been a combined increase of 111 mb since the end of March and increasing by the day.
Given the current oversupply, both OPEC+ and countries outside the organization would have to cut back on their production not to exhaust storage capacity by the end of May.
However, if demand for floating storage continues taking VLCCs and Suezmaxes from active trading, it is likely a new round of inflated tanker rates would ensue soon.