Tankers could remain off the island longer than desired

A drop in the demand for oil products could have led 20-odd tankers to anchor off Malta, economist John Cassar White told The Times.

The tankers are anchored at Hurd's Bank, about 18 miles off Malta, amid fears they could pose a major environmental threat to the island in the event of a leakage.

Mr Cassar White said the world demand for oil was still not growing at the rate needed to keep those trading in the commodity happy to move their cargo. "I think that, until the world economy starts to recover, there is no immediate prospect of these tankers moving on with their cargo and trading normally," he said.

Industry sources had argued that, since the price of leasing tankers had dropped due to lower demand for shipping, companies might have bought stocks of oil when this was at its lowest and were storing it at sea until the price went up.

The scenario appeared plausible for the CEO of Falzon Group of Companies, Joseph Falzon, who said it was likely oil tankers were waiting at Hurd's Bank for the price of oil to rise before they docked and unloaded their cargo.

"We do not have a crystal ball, so we cannot predict exactly what will happen. But the price of petroleum can rise within a matter of minutes and fall again within hours," he said.

Mr Falzon believed the world was not that close to financial recovery. "Without wanting to sound too pessimistic, I think we are entering a recession rather than going out of it," he said, adding that fluctuations in oil prices happened and the world had to find a balance between currencies, commodities and investments.

However, Mr Cassar White said that, while it was possible that people bought oil because they were expecting the price to go up, it was more likely that the tankers were not unloading their stocks because of lack of demand.

A similar scenario had happened to the aviation industry and there were planes grounded in the US desert because demand for air travel had declined.

"I do not see this as something very extraordinary. We are probably noticing it because it is closer to our shores."

He said new ships had been docked in different ports at the turn of the millennium until world trade picked up and demand for shipping increased.

Another scenario could relate to futures markets, contracts that oblige a buyer and seller to exchange a product at a future date at a prearranged price. Lower tanker leasing costs could make it more attractive for oil to be stored out at sea until the contract date, industry sources said.

The tankers are believed to be carrying enough oil to supply Malta for three years or a quarter of the world's daily requirement, posing grave concerns for the environment.

Leading physicist Aldo Drago, head of the University of Malta's Physical Oceanography Unit, described the situation as "critical".