Introducing the Biggest Offshore Oil Supermarket

In the wake of warnings that new anti-pollution legislations could disrupt global energy markets, a fleet of tankers is stockpiling oil in the Strait of Malacca and planning to establish what's been dubbed the 'biggest offshore oil supermarket in the world'.

The prediction comes from Goldman Sachs, with experts warning that new ship-emission regulations introduced by the International Maritime Organisation (IMO) could trigger a surge in demand for low-sulphur fuel. The regulations are set to come into play in 2020 and will force shipping fleets across the globe to swap fuel with sulphur content of more than 3% for cleaner, more eco-friendly alternatives.

Experts predict "flexible, low-cost floating tank farm"

The legislations have prompted top oil trading houses to buy and store millions of barrels of low-sulphur fuel, as well as products like diesel and light-cycle oil. The plan is to resell the products when demand for IMO-approved fuel spikes. This would establish an offshore supply and distribution hub in the Strait of Malacca, an important trading waterway that supports to movement of oil from the Middle East, Africa and the United States to Asia.

Anoop Singh, an analyst for Singapore-based shipbroking company Braemar ACM says, “In the coming months, we could see a flexible, low-cost floating tank farm in the Strait of Malacca. We expect to see a whole fleet of tankers off Singapore and Malaysia taking part in a low-sulphur oil blending play that will also be found off other major ports such as Fujairah and Rotterdam.”

Oil traders biding time until compliant fuel price surge

According to information released by data intelligence firm Kpler SAS, there are already at least five tankers anchored off Singapore, all with low-sulphur fuel oil blending components. This includes large vessels with the capacity to hold up to 2 million barrels of oil. As other traders attempt to secure a piece of the action the number will likely increase.

“Oil traders are hoarding low-sulphur oil components in the hope that prices of compliant fuels will blow out in six to nine months’ time when new IMO rules kick in,” asserts Nevyn Nah, an industry consultant for Energy Aspects Ltd.

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