My rough estimate says that at any given time in recent years about 600 to 700 million barrels of crude oil are at sea, enroute from exporters to consuming countries.
As a shipowner, about the only cost I have much control over is my fuel cost. Financing and insurance costs are a function of time--so much per month or year. Maintenance is also mostly a function of time, but it might be defered during economic downturns. Crew costs are also a function of time--so much per month, or per shift.
Fuel burned is a function of speed--the drag goes up as a function of the speed--roughly at the square of the speed--double the speed equals more than double the fuel, but half of all the other costs. So at any time, there is an optimum speed--the higher the cost of fuel, the slower to steam to optimize profits. The lower the fuel cost, the faster you show go, up to the limit posed by higher drag on the ship's hull.
We have just had the biggest drop in bunker fuel prices ever experienced, so every good charter captain just started steaming faster--anything else would be to leave profits on the table. How much faster? If 25%, then the amount of crude at sea would have dropped by 100 to 150 million barrels over the past 2-3 months, or about 1.5 to 2 million barrels per day. This destocking at sea would make it look like we have a worldwide oversupply of that amount. By the way, this same factor of ship-speed also explains the weakness in the BDI.
It also says that once oil prices(bunker fuel) starts back up, then that 2 million b/d will dissappear from the markets as the steaming speed slows back down. I happen to think the destocking at sea is about to end, and that, together with the winter seasonal increase and OPEC cuts may remove some 6 million b/d from markets between now and February, and that is why Land-Lubber just might be right in his call for $150 crude by 2-29-2009. Just my 2 cents for discussion. I can sure tell you as a pilot I adjust airspeed to reflect fuel costs, and so do all the airlines.
