“Capacity almost completely sold out,” says world’s largest oil storage firm

By Fred Pals and Jack Wittels on 4/21/2020

AMSTERDAM (Bloomberg) --The world’s biggest independent oil storage company said that space for traders to store crude and refined fuels has all but run out as a result of the fast-expanding glut that Covid-19 has created.

“The available capacity on the oil side is almost completely sold out for our terminals,” Gerard Paulides, the chief financial officer of Rotterdam-based Royal Vopak NV, said in an interview. “For Vopak, worldwide available capacity that is not in maintenance is almost all gone and from what I hear elsewhere in the world we’re not the only ones.”

The firm is racing to complete maintenance to free up whatever space it can. Worldwide oil demand has collapsed at an unprecedented speed because the coronavirus has caused a mass halt to global transportation systems and hurt economies. With producers failing to reduce output at the same pace, an oversupply of crude and fuels has quickly emerged.

U.S. crude oil futures for May moved into negative territory on Monday -- meaning traders were effectively willing to pay people to take barrels. A large part of that was because of concerns about space to store.

From Indonesia to Mexico, companies are scouring the market for places to store oil and refined fuels, often parking unwanted supplies on tankers because shore-based facilities are full. In the North Sea, a handful of vessels have been idling with gasoline and jet fuel on board for days now.

“It’s extremely tough to find something in this market,” said Krien van Beek, a storage broker at ODIN-RVB Tank Storage Solutions, discussing the global situation for fuels. Companies that have their own tanks may not have filled them, but there are now barely any left for third-party hire, she said.

Vopak operates three main hubs worldwide in Singapore, Rotterdam and Fujairah. The company traditionally benefits from contango in oil and fuel markets where the spot price is depressed, meaning oil can be stored for sale later at a higher price. The company said in its earnings release today that the impact of contango will certainly be seen in the second quarter. Vopak is working at a fast pace to bring back from maintenance four tanks in Rotterdam.

“All the available capacity that is in demand will be used and is used,” Paulides said.

The diesel, jet fuel and gasoline markets are all in sharp contangos in Europe, the U.S. and Asia Pacific. Jet and gasoline have both suffered massive demand losses, and diesel buying has also been hit, despite its uses beyond consumer transport.

The strain on storage is also starting to create some weird shipping movements as traders send tankers on odysseys to find the best places to stash supplies.

Two tankers that were hauling cargoes of diesel-type fuel to Europe from India have now changed course and are sailing for New York, where there’s more storage available, according to two people involved in the market. At least one jet fuel tanker that had earlier signaled Europe has also diverted to the U.S.

“Under pressure is probably putting it mildly,” said Steve Sawyer, director of refining at Facts Global Energy, describing the global situation for fuels storage. “We’re probably close to filling up.”

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