- Traders are storing an estimated record of 160 million barrels of oil on ships.
- Seek to tackle a glut of stocks created by a slide in global demand from the coronavirus.
- OPEC and other producers including Russia have agreed with a record cut of 9.7 million barrels per day.
- Traders rushed to find storage on land and at sea creating the biggest oil glut in history.
- Smaller tankers were boosting volumes being held at anchor.
- The crude market is currently trading in what is known as contango.
- The forward prices are higher than immediate prices.
According to an article published in Reuters and authored by Jonathan Saul, traders are storing an estimated record of 160 million barrels of oil on ships.
A glut in oil storage
It is double the level from two weeks ago as they seek to tackle a glut of stocks created by a slide in global demand from the coronavirus, shipping sources say.
Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia have agreed with a record cut in output from May of 9.7 million barrels per day, or almost 10% of global supply, to help support prices and curb oversupply.
At the same time, traders have rushed to find storage on land and at sea in what is believed to be the biggest oil glut in history.
Floating storage reaches 160 million barrels
Shipping sources said oil held in floating storage on tankers had reached at least 160 million barrels including 60 supertankers, known as very large crude carriers (VLCCs), which can each hold 2 million barrels.
This compared with 25 to 40 VLCCs already chartered with storage options at the start of April and fewer than 10 VLCCs in February, the sources said.
Small tankers boost sales volume
Smaller tankers were also being used, which was also boosting volumes being held at anchor, they added.
The last time floating storage reached levels close to this was in 2009 when traders stored over 100 million barrels at sea before offloading stocks.
“This is an unprecedented time in the history of tankers and while VLCC tanker storage is garnering the headlines, smaller crude and product tankers are also being used for storage,” Gregory Lewis, shipping analyst with global financial services group BTIG, said in a note this week.
Locations typically include the U.S. Gulf and Singapore, where major oil hubs are situated.
The crude market is currently trading in what is known as contango, where forward prices are higher than immediate prices. This market structure encourages traders to park barrels in storage in the hopes of selling them for a profit later.
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