Glencore share price: Company storing crude in tankers off Singapore

on Jan 29, 2016
Updated: Oct 21, 2019

Glencore Plc (LON:GLEN) is reportedly storing huge amounts of crude oil in tankers anchored off the coast of Singapore and Malaysia, on expectations that prices will climb in the future.

The Swiss-based commodities trader has at least four “very large” crude carriers, each with a capacity of some two million barrels, Bloomberg reported yesterday citing people with knowledge of the matter.
Charles Watenphul, a spokesman for Glencore, declined to comment.
The market situation in which spot prices are expected to climb in future months is known as a contango, and storing commodities for future sale can be very lucrative during a contango.

Floating storage increases Glencore’s ability to supply cargoes on short notice or load oil on smaller vessels for sale to Chinese refineries and other Asian buyers who do not have access to ports that can accommodate larger ships, the people said.
“Traders will be closely watching the contango structure to determine whether to use more vessels for crude floating storage,” said Tushar Tarun Bansal, an analyst in Singapore at industry consultant FGE. “The Brent contango structure just about covers the cost to time-charter a vessel for floating storage, though we also need to consider added costs such as from financing.”
Storing crude on ships is close to being viable, Fearnleys A/S analyst Jonathan Staubo said as quoted by Bloomberg yesterday. The 3-month contango needs to be about $2.70 to cover the cost of hiring ships and other expenses associated with storing barrels at sea profitably, he said. That spread is currently at about $2.50 for Brent.
Glencore’s share price closed Thursday’s session with a 1.7-percent loss to 90.45p. So far this year, the stock has gained about 1.4 percent, which compares with a five-percent drop for the FTSE 100. However, Glencore closed 2015 as the second-worst performer on the FTSE, losing over 70 percent of its market valuation.
As of 07:46 GMT, Friday, 29 January, Glencore Xstrata PLC share price is 90.45p.