SINGAPORE/DUBAI, Feb. 12 (Reuters) – Gas oil stored on tankers in Asia has swelled to unprecedented volumes of at least 14 million barrels and could rise further as weak global demand persists, prompting traders to turn to this region for support.

The volumes, which are enough to meet 16 percent of global daily oil demand, come as the current East-West arbitrage economics was not viable, even as Western distillate supplies are gradually drawn down during the cold winter.

''Players are positioning their vessels mostly in Southeast Asia, waiting for the East-West arb (arbitrage) to open, so they can float them over to Europe,'' said a distillates trader with a European trading firm.

But overall global volumes remain heavy and traders may also be hoping for demand in India, Indonesia and Vietnam to take up the supply, ahead of spring maintenance in Asia and as refineries here face the occasional outages, industry sources said.

Most of the 18 Long-Range (LR) tankers storing a total of nearly 2 million tonnes of gas oil (diesel) are anchored off Southeast Asian, with a few located off India and the Middle East Gulf, traders and shipbrokers said on Thursday.

At least six Panamax tankers, measuring 60,000 to 80,000 deadweight tonnes (DWT), nine Aframaxes of 80,000 to 120,000 DWT, and three Suezmaxes, from 120,000 to 200,000 DWT in size, are moored off the following locations: Singapore, Malaysia, Indonesia, Fujairah in Middle East Gulf and Sikka along the Indian coast.

Charterers include European trading houses Vitol, Sempra, Mercuria, Trafigura and Glencore, as well as oil major Shell and US investment bank Morgan Stanley, they added.

More trading houses could join in the contango play when the market structure widens towards the end of winter as demand for heating fuel thins out, analysts and traders said.

''The contango reflects the weak demand situation in the market and as such, should likely remain throughout 2010,'' said David Kirsch, director of market intelligence services at PFC Energy in Washington.

''Even with an increase in demand or substantial production curbs from OPEC, the current overhang in global inventories will persist for several more quarters at least,'' he added.

For now, the vessels need to stay in Asia, as it would too costly to move cargoes to Europe, as had been done regularly since first-quarter last year, traders said.

''Given the weak gas oil EFS levels for February and March, if they sail the cargoes over to the West now, they might be looking at a huge loss,'' the trader with the European firm added.

Over the last two weeks, February East-West EFS swaps were traded at around $8.50 a barrel, while March swaps were traded at between $4.75 and $11.00 a barrel, Reuters data showed.

''The value should be at least $25.00 a barrel on a Suez floater, otherwise there's not much point,'' the trader added.

It is essentially a waiting game, said Victor Shum, an analyst with energy consultancy Purvin & Gertz Inc.

''Traders are squeezed by the narrowing contango, but they have no choice but to wait for demand outlets to arise, and any recovery in demand at this stage is still very fragile,'' he said.