Oil traders are struggling to find enough ships, railcars, caverns and pipelines to store fuel as more conventional storage facilities fill up amid abundant supply and plummeting demand due to the coronavirus crisis.
FILE PHOTO: A sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, U.S. November 22, 2019. REUTERS/Angus Mordant
Demand for oil and its products has tumbled as much as 30% as governments around the world have told citizens to stay home to prevent the virus spreading - grounding planes and leaving cars parked up. But the world remains awash with oil supplies. Europe’s northwestern refining and storage hub still has space to fill but industry experts say most of the remaining capacity has already been booked.“We are now working on the most oddball storage locations, really tough locations where there are operational constraints,” said Krien van Beek, a broker at ODIN - RVB Tank Storage Solutions in Rotterdam.
“The big tanks where you pull a ship in and empty the whole thing, that’s all gone. What you have is pots and pans,” he said. In hubs with a little space left, such as Chicago, tank operators can charge a premium and longer leases. They have been demanding leases of 24-36 months rather than the more usual 12 months, according to two refined products brokers.With the market oversupplied, oil prices LCOc1 have plunged to their lowest levels in two decades. This week, U.S. Western Texas Intermediate made an unprecedented dive into negative territory, so sellers had to pay people to take it.
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