Aug 23 (Reuters) - NuStar Energy LP said on Friday it has signed a fuel oil supply agreement for its storage facility on the Caribbean island of St. Eustatius with a major trading company, in a bid to reduce its working capital costs.
NuStar, which owns more than 13 million barrels of storage capacity on the tiny Caribbean island, said it would purchase bunker fuel from the unnamed trading company to supply its customers in the region. The company estimated the deal would lower its working capital expenses by $40 million to $50 million and reduce NuStar’s exposure to price swings.
A NuStar spokeswoman declined to identify the trading company involved. She said the deal was signed on Aug. 5.
As part of the deal, the trading partner will lease some of the space at the tank farm, the NuStar spokeswoman said.
NuStar Chief Executive Curt Anastasio said in a statement that the company’s storage business has suffered from weak demand and difficult market conditions.
“This agreement allows us to remain in a competitive position as a bunker fuel marketer, while reducing our exposure to price risks and dramatically reducing our working capital expenses related to our bunker marketing operations,” he said.
U.S. import data from port intelligence group PIERS shows that international commodities trading firm Vitol has increasingly been using St. Eustatius as a hub for oil shipments to the U.S. Gulf Coast and Florida.
The PIERS data shows that Vitol made at least 19 deliveries of refined fuel products from St. Eustatius to the Gulf Coast and Florida between October 2012 and June of this year.
A spokesman for Vitol declined to comment on its shipping activity or on whether it had partnered with NuStar, saying the company doesn’t discuss its commercial relationships.