How Much Oil Is in Storage Globally? Take a Guess
News Article Sponsored by
Article Published by DAN STRUMPF and NICOLE FRIEDMAN
Click HERE to Read Article From Publisher
SINGAPORE—The historic fall in oil prices has created a pileup of inventories, much of it stashed in tanks in the U.S. and other industrialized countries that are committed to disclosing the latest tally, but millions of barrels of oil are flowing to locations outside the scope of industry trackers.
Some countries, such as Russia and China, choose not to report their oil-storage levels. And traders and oil companies that park supertankers have no obligation to make public their supply. This makes for more cryptic and volatile oil markets. How much crude is in these locations, and how quickly it can be resold into the market, can affect oil prices.
“The data itself is so inconsistent,” said Harish Sundaresh, portfolio manager and commodities strategist for Loomis, Sayles & Co., which manages $240 billion. “In countries like Nigeria, Brazil, Angola, it’s not trustable.”
Keeping track of inventories has become more complicated as developing countries store and consume more oil.
Singapore, home to one of the world’s busiest ports and the Asian headquarters of many big oil-trading firms, is one country befuddling analysts. The waterways surrounding the island nation have become home to one of the world’s biggest oil-storage sites. But it is unclear how much oil is in the tankers anchored there.
At the beginning of July, 23 supertankers capable of holding 43 million barrels of oil were anchored for a month or more in the Singapore straits, according to Thomson Reuters’s vessel-tracking service, up from 15 ships at the start of the year. If they were full, it would be enough to meet the U.S.’s oil needs for more than two days.
But no official count of the oil exists. Thomson Reuters and others offer estimates based on the reported level of a vessel’s waterline. Yet a number of ships are likely carrying fuel oil, a refined product used in shipping, analysts said. Others may be carrying seawater, further complicating estimates.
“There are many different figures being mentioned in terms of the amount of ships which are actually being used for storage” and the amount of oil that is on them, said Tom Bonehill, managing director of Norstar Shipping, a tanker owner.
Inventories are also taking on a bigger role as the Organization of the Petroleum Exporting Countries retreats from its traditional task of managing prices, analysts say. Since November 2014, OPEC has increased its production to pump at nearly full tilt. That leaves the group with less spare capacity, meaning inventories become more critical if supplies elsewhere are disrupted.
“OPEC has stopped being a swing supplier,” said Antoine Halff, director of the oil-market program at Columbia University’s Center on Global Energy Policy. “Given the uncertainty about whether shale–oil production in the U.S. can take the role of swing supplier, it falls on stocks” to replace lost barrels in the case of a supply disruption.
With little hard data on certain storage spots, analysts piece together inventories using a patchwork of public information and guesswork.
Uncertainty around storage was highlighted after attacks on Nigerian oil facilities in May and June. Following the assaults, some analysts forecast that Nigerian output would fall, which helped push oil prices above $50 a barrel. But shipping data showed Nigerian exports holding steady above 1.5 million barrels a day, according to data provider Windward.
Where did the exports come from? “That’s the big question,” said Omry Hochberg,Windward’s finance product manager. “Are they drawing from storage, or is production higher than people think it is?”
Nigeria eventually made its storage data public in July, but that was weeks after the attacks. The Nigerian National Petroleum Corp. didn’t respond to requests for comment.
A body known as the Joint Organizations Data Initiative gathers global storage data, but it has no figures for Russia, China and others. Some countries lack the resources to gather such data and don’t view inventory disclosures as a high priority, experts say.
These locations are soaking up more oil. Countries outside the Organization for Economic Cooperation and Development, an intergovernmental organization of 35 countries with market economies, now account for half of global demand, up from 41% a decade ago.
“But that hasn’t been accompanied by equivalent gains in inventory reporting,” saidDavid Fyfe, head of market research and analysis at trading firm Gunvor Group. “It adds another layer of opaqueness to the market.”
In addition, nations don’t report “floating storage,” or tankers anchored off their coasts, as in Singapore. The IEA said floating storage in June rose to 95 million barrels, the highest level since 2009.
In China, another storage mystery is unfolding. Government data show oil imports rising at a faster rate than refiners are processing it. The figures suggest the country built a surplus 160 million barrels during the first half of the year, enough to meet its oil needs for about two weeks.
Analysts believe those barrels have gone to commercial tanks or to government-owned strategic reserves.
The distinction is critical. If most of the oil has gone to strategic reserves, demand could shrink once the tanks reach capacity, which some analysts say could happen this year.
“The reality is, you don’t have any definitive numbers that give you huge confidence one way or the other,” said Doug King, chief investment officer at RCMA Asset Management.
Click HERE to Read Article From Publisher