The volume of crude stored on ships in Asia has come off the peaks seen earlier this month on a recovery in demand in China and India, trade sources and analysts said.
A total of 3.4 million tonnes (24.8 million barrels) of crude oil was discharged from floating storage into Asian markets in the past seven days, with China the top destination at 1.8 million tonnes and India second at 842,679 tonnes, according to oil analytics firm Vortexa.
Robust demand from China, the world's top oil importer, and OPEC+ production cuts supported crude prices this month while the Brent's contango price spread that previously encouraged traders to store oil for future sales to reap higher prices has also narrowed.
"Rising crude prices and narrowing (Brent) contango with the tightening of the crude market are nibbling away incentives of storing crude on tankers," said Vortexa's analyst Serena Huang.
Data from oil analytics firm Kpler showed that floating storage volumes in Chinese waters came off a peak of 35.4 million barrels on May 23 to 29.4 million barrels as of May 26. Oil majors and trading houses have been offering Middle Eastern and West African oil stored at sea as spot prices strengthened in Asia, trade sources said.
Refiners are buying on hopes of a fuel demand recovery as more countries ease coronavirus restrictions, and on anticipation that crude prices and freight rates may rise further, they said, although refining margins remained weak, limiting refiners' ability to raise output.
"While we're seeing signs of global demand recovery, we're still in the early days of a long road to full recovery, and the outlook remains uncertain on whether there could be a second wave of coronavirus," Huang said.
(1 tonne=7.3 barrels for crude conversion) (Reporting By Shu Zhang and Florence Tan; editing by David Evans)