Record global oil inventory has sparked fears of a further sharp price drop as storage is exhausted, but futures prices suggest those fears are premature.
“Fill ’er up,” a refrain that usually makes oilmen smile, is taking on an ominous tone for the energy industry.
There is now so much crude oil being pumped world-wide amid such tepid demand that producers are fretting over the possibility of a further sharp downward move in prices. The 93 million barrel question is how much more space there is to put it all and whether storage will be exhausted before the market is balanced.
Were that to happen, it could cause the oil-price rout to grow even uglier. For now, that prospect looks to still be a ways off even if the Organization of the Petroleum Exporting Countries, which meets this week, fails to curb output.
Yes, inventories are at unheard of levels. The International Energy Agency said last month that they kept climbing in September when they usually decline. But, despite reams of data on developed countries from the IEA and other agencies, traders still have only a hazy idea of how much space is left world-wide. This is because of less reliable data from developing nations when it comes to storage capacity.
One sign that there is nowhere left to stash oil on land would be the widespread use of so-called floating storage—putting it on supertankers with nowhere to go.
by Spencer Jakab