From Canada and the Caribbean to the Baltic and Singapore, oil tanks around the world are filling fast, despite a 50%-100% jump in lease costs, as oil companies and traders scramble to park unwanted crude and refined products, as reported by Reuters.
Millions of barrels are struggling to find buyers among industrial users and refiners, which have cut operations as the impact of the coronavirus has destroyed demand and a Saudi-Russia market share battle has led to a flood of supply.
Fuel storage rates doubled this month in some onshore European and U.S. hubs as traders rushed to secure tanks in the hope of selling their products at a higher price when the coronavirus outbreak eases and demand recovers.
Europe’s Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub saw the cost of storing diesel and jet kerosene rise by between 50% and 100%, traders and industry watchers said.
“Storage prices for gasoil doubled in the last three weeks from 2 euros ($2.16) per cubic metre per month to 4 euros,” said Patrick Kulsen from Insights Global, a firm that tracks oil product storage and exports in the ARA region.
As most airliners ground their fleet because of the virus, jet fuel storage rates have increased by 50% since before the coronavirus crisis to 3 euros per cubic metre per month, a source with a storage firm in the ARA region said on condition of anonymity.
The picture in the Mediterranean is similar. In the last three weeks, Barcelona storage prices rose to $3.5 per cubic metre per month from $2.85 for storage for as far out as the end of 2021, a Mediterranean jet fuel trading source said.
In Cushing, Oklahoma, the delivery point for benchmark U.S. crude, traders said rates more than doubled to 50 cents per barrel per month from about 20 cents a month ago.
Highlighting the current premium for storage, shares in Dutch storage company Vopak were trading close to their 2015 highs despite a global market rout in recent weeks.
Vopak declined to comment and unlisted German storage firm Oiltanking did not respond to a request for comment.
DIFFICULT LOGISTICS
The world is estimated to have 0.9-1.8 billion barrels of spare storage capacity - equal to 9-18 days of global supply of 100 million barrels per day (bpd) or 90-180 days to accommodate supply exceeding demand by 10% or 10 million bpd.
Commodity data firm Kpler estimates the industry is using around 71% of its global storage capacity and has 1.8 billion barrels of free space. UBS estimates on-land free space at 0.9 billion while Bernstein puts it at 1.6 billion barrels.
But even if traders in their search for storage are willing to pay high prices, technical restrictions limit the amount available.
“Every installation will eventually have a working maximum,” Alexander Booth, head of market analysis at Kpler, said.
Operational limitations can prevent full utilisation. Also, light crude cannot be stored with heavy crude, and the quality of jet and gasoline can deteriorate when they are stored.
Not all storage is conveniently located and can involve the additional costs of longer shipping routes.
ALMOST FULL
Storage at Cushing in the United States will reach maximum capacity as early as May or at the latest by June, traders said as they already see heavy oversupply at the hub.
Caribbean storage for oil is also nearing capacity, storage brokers said. The Limetree Bay refinery and terminal in St. Croix as well as the Bullenbay oil terminal in Curacao have seen an increase in demand, sources said.
“We have requests from people wanting to store,” said Marcelino de Lannoy, interim managing director at Refineria di Korsou, the state-owned refiner in Curacao.
In Western Canada, oil output could from April fall by some 11%, or 440,000 bpd, Rystad Energy estimates, as the country is days away from running out of storage.
Baltic oil product terminals in Estonia, Latvia and Lithuania are also brimming, industry sources said.
The terminals were half idle after Russia switched to shipping oil and products to its own ports around a decade ago.
Now trading houses such as Vitol and Trafigura, which co-own or have long-term leases for terminals, are using them at capacity.
South Korea’s crude storage and products storage in Singapore are also all leased out, according to traders.
“Land tanks are all taken. I don’t think there is any spare anywhere,” said an oil trader in Singapore, referring to storage space across Asia. ($1 = 0.9249 euros)
Reporting by Bozorgmehr Sharafedin, Shadia Nasralla, and Devika Krishna Kumar, additional reporting by Dmitry Zhdannikov, Ahmad Ghaddar, Florence Tan, Gary McWilliams, Gleb Gorodyankin and Natalia Chumakova; Editing by Dmitry Zhdannikov and Barbara Lewis
