The world's biggest tanker traffic jams!

The world's biggest tanker traffic jams are now a common feature at the ports and also at the seas !

Various ports across world are now struggling to cope with a global oil glut and excess supply, huge queues of supertankers have formed in some of the world's busiest sea lanes, where some 200 million barrels of crude lies waiting to be loaded or delivered. The vessels, filled with oil worth around $7.5 billion at current market prices, would stretch for almost 40 km (25 miles) if formed up in one straight line.

What are the reasons for traffic jams in oceans?

At the heart of the congestion is an unprecedented rise in global oil production (2014 onwards to 2016) coupled with rising consumption.

We will look at the reasons for this supertanker traffic jam

1.      A massive oil supply glut has caused global oil prices to crash from 2014 onwards. Ferocious production from OPEC and near-record U.S. output, higher outputs from Canada, Brazil are adding to sky-high oil inventories around the world.

2.      Not enough buyers  - Maritime congestion had occurred towards end of 2015 in Singapore off China and Arabian Gulf. There appears to be more oil floating in ships with not enough buyers

3.      High inventories - There are massive massive  inventories of crude oil around the world, with global stockpiles sitting at a record 3 billion barrels, according to the International Energy Agency.

a.      A stunning 487 million barrels of crude is sitting in U.S. inventories, levels unseen at this time of the year in the last 80 years, according to the U.S. Energy Information Administration.

4.      Red-hot demand from new entrant refineries in China : Soaring output has pulled down oil prices by as much as 70 percent since 2014. 
   That has helped spur demand from China's independent refiners, freed from government restrictions on imports just last year and gorging on plentiful crude, putting extra pressure on ports.

5.    Port infrastructure in the Middle East and Latin America that is unable to cope with current supply and demand requirements.

6.      Renewable energy & other alternate sources of energy - Customers are turning to renewable sources like wind and solar energy and alternate fuels like gas leading to reduced demand for oil.  

The worst congestion is in the Middle East, as ports struggle to cope with soaring output available for export, and in Asia, where many ports have not been upgraded in time to deal with ravenous demand as consumers take advantage of cheap fuel.

As per Bloomberg's report in March 2016, the queue of ships waiting outside Europe’s biggest port and oil-trading hub of Rotterdam has grown to the longest in seven years as a global supply glut fills storage capacity.  As many as 50 oil tankers, twice as many as normal, are waiting outside Rotterdam because storage sites are almost full, the port’s spokesman Tie Schellekens . 

Consequences of tanker traffic jams?

1.      Missed and messed up Schedules:  Shipping Schedules are going awry. Ship tracking data shows 125 supertankers, with the capacity to carry oil to supply energy-hungry China for three weeks, waiting in line at ports. The combined daily cost is $6.25 million, based on current ship hire rates of around $50,000-a-day. While daily tanker fees are typically borne by the fuel buyer, the port delays have a knock-on affect across the shipping industry. It messes up

port schedules, catering schedules, crew schedules and the schedules of delivering the transported goods," said one shipping logistics manager in Singapore. It also raises the cost for pretty much everyone involved.

2.      Losses for dealers: A month-long delay can turn a profitable trade into a painful loss for the dealers."If you've bought 100,000 barrels of crude at $40 (a barrel) that'll cost you $4 million," said one oil trader. "And if you've calculated another 1.5 million bucks for a month's worth of shipping, but you end up paying double that because your ship is stuck in port congestion, then that can seriously mess up everything from your schedule to your arbitrage profitability."

3.      Bored crews - The oil glut is also causing congestion between the main producer and consumer hubs. Almost all supertankers heading to Asia pass by Singapore or adjacent facilities in southern Malaysia, the world's fuel station for tankers and also a global refinery and ship maintenance hub.  Shipping data shows that some 50 supertankers are currently anchored in or close to Singaporean waters for refueling, maintenance or waiting to deliver crude to refineries or be used as floating storage.

For sailors stuck in a queue of anchored tankers, one of the biggest problems is simply wiling away the time. "Some of the ships are well-equipped for their crews, but many aren't," said a Filipino sailor who left a very large crude carrier (VLCC) in March after a voyage to China.

"On my last one, we had no regular internet ... only an old TV with a couple of old DVD movies. The food is terrible and while waiting to offload we did pretty hard maintenance work. The sort of stuff you can't do when the engine is running."

To summarize.. The excess oil supply might be great for end users/customers who will be smiling as they can fill up their cars with cheaper fuel. However it leads to unsettled and chaotic global markets creating excess supply and consequences like super tanker traffic jams , losses for oil companies and related industries and possibly job cuts. 


Source: CNN , Reuters, Bloomberg