The World Is Running Out of Places to Store Its Oil - The New York Times - 0 views
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The world is awash in crude oil, and is slowly running out of places to put it.Massive, round storage tanks in places like Trieste, Italy, and the United Arab Emirates are filling up. Over 80 huge tankers, each holding up to 80 million gallons, are anchored off Texas, Scotland and elsewhere, with no particular place to go.
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The world doesn’t need all this oil. The coronavirus pandemic has strangled the world’s economies, silenced factories and grounded airlines, cutting the need for fuel. But Saudi Arabia, the world’s largest producer, is locked in a price war with rival Russia and is determined to keep raising production.Prices have plummeted.
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This chaotic mismatch in supply and demand has benefited consumers, who have watched gasoline prices slide lower.And it has been a field day for anyone eager to snap up cheap oil, put it someplace and wait for a day when it’ll be worth more.
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“We usually do about two storage deals a day,” said Mr. Barsamian, who runs a company in Princeton, N.J., called the Tank Tiger, a nod to the local university’s mascot. “We have done about 120 in the last couple of weeks.”
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People in the energy industry say they have never seen changes happening at the speed and magnitude that are occurring because of the coronavirus.
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The first major downturn in demand occurred in February when China, the world’s largest energy consumer, shut down much of its economy in an effort to stabilize the spread of the coronavirus. Now, the slowdown is rolling across the world, with much of Europe and major parts of the United States in lockdown.
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The price war between Saudi Arabia and Russia has exacerbated the situation. The Saudis are slashing prices and threatening to ramp up oil output by about 25 percent to 12 million barrels a day, beginning in April. The surplus, IHS Markit forecasts, could add up to a tank-busting one billion barrels or more.
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Not only does oil need a place to go, but the state of the oil market has provided traders with an opportunity to make money. They are taking advantage of a market where prices in the future are much higher than current levels. For instance, a barrel of light, sweet U.S. crude is priced at about $25 a barrel for May, about $6 lower than August. So a trader or an oil company can make easy money by buying oil at today’s depressed prices, selling it on the futures market and pocketing the difference minus storage and other costs — a situation known as contango.
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Knowing how much oil is stored around the world is a key metric to “understanding the health of the oil market,” said Hillary Stevenson, an analyst at Genscape, a market intelligence firm. But, she warned, “capacity is finite; the safety net is only so big.”
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One sign of a glut: The volume of oil placed on ships to wait for better days has grown by about 25 percent in March. According to Mr. Booth, about 81 loaded tankers — an unusually high number — are loitering off coasts around the globe.
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The fact that oil is being put on ships, a more costly proposition than storage on land, implies that the world is running out of room, at least in some places, Mr. Booth said. Chinese buyers, perhaps seeing current prices as a bargain, continue to import at high levels, he said. Mr. Booth estimated that three-quarters of a billion barrels of usable storage capacity remained around the world — not enough room for the buildup in supplies some forecasters are predicting.
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In the wake of price-cutting by Saudi Arabia and other countries, oil companies in the United States are being paid less. On Tuesday, Enterprise Products, an Oklahoma company, posted prices for various grades of crude that ranged as low as $7.61 a barrel.
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Space is running out in western Canada, whose 40 million barrels of storage is now more than three-quarters full, according to Rystad Energy, which estimates that producers will need to slash production by 11 percent