In southeast Asia traders are cutting their tenancy on fuel storage capacity in a bid to control costs.
Japans Marubeni and South Koreas SK Energy have cut storage capacities by up to half over the past month, and US-based Westport Petroleum has subleased its storage on a short-term basis.
At least two other trading firms are prepared to return the tanks to the storage owners, traders say.
The reduction in capacity is not expected to have an immediate impact on the market as the total capacity will stay well above demand levels with new players taking new storage space.
Singapore is facing an oversupply of onshore storage space for residue fuels, which more than doubled since 2007 but is not being fully utilised by occupants, leading to increased trading costs. The market has become increasingly congested with players meaning some undercutting because they all have more oil to sell than there is demand.
Total fuel oil storage capacity, including onshore and floating tanks in the Singapore-Malaysia region, stands at nine million to 10 million tonnes, against only half that in demand.
Marubeni will give up its lease on 100,000-150,000m3 of fuel oil storage at Chevrons Penjuru terminal in western Singapore by the end of the month. It has instead sub-leased a lower capacity of 80,000m3 from Westport at Vopak Terminals until May.
Westport which has a total capacity of 240,000m3, is expected to retake the tanks once Marubenis deal expires.
SK Energy, which has about 200,000-250,000m3 of capacity at Horizon, has also sub-leased 80,000-100,000 tonnes to Russias Lukoil and Cargill International.
Monthly throughput levels on landed storage, the frequency by which traders move volumes from the tanks and impact trading margins, have fallen to 0.6-0.8 turns per month from 1.0-1.5 times a month before 2007, when storage capacity started to balloon on a flurry of new terminals coming onstream.
