The oil demand worldwide has slumped at an unprecedented pace due to the mass halt of global transportation systems and industries caused by the severe outbreak of COVID-19. Meanwhile, according to the latest news, the world’s biggest independent oil storage company, ‘Royal Vopak NV’ has all but run out of space for storage, particularly, for their crude and refined products.
At the beginning, when the demand for oil was declined, the producers have not been efficient enough to reduce the output at a matching speed, thus, opening avenues for a rapid emergence of an oversupply of crude oils and fuels. The situation being this, Vopak is now darting towards complete maintenance to free up whatever space it can afford.
It has extremely become tough to find storage for oil in the world market during this period of pandemic. Even the companies that own tanks, although they have not filled them, would barely let a third-party hire them.
Turning towards the US crude oil futures, having no space for storage, the traders were even willing to pay the people to take barrels. Some other companies have started scouring for places from Indonesia to Mexico to store crude oil and refined fuels. As the shore-based facilities are already filled, their plan is to park the unwanted supplies on tankers. Meanwhile, a few vessels with gasoline and jet fuel on board have been idling in the North Sea for several days now.
Singapore, Rotterdam and Fujairah are the three main hubs operated by Vopak. The company is to benefit from contango where the spot price is decreased. This means that fuels can be stored to be sold later at a higher price. But, according to the Company’s earnings release, the impact of contango could only be observed in the second quarter of this year. Till then, Vopak is making efforts to get four of the Rotterdam tanks back to operation that are currently under maintenance.
Jet fuel and gasoline markets have already suffered huge losses in demand. More or less, the diesel markets are not spared despite the uses of diesel beyond transport.
On the other hand, global floating storage is on an increase, making the amount of oil stored at sea rising up to almost 250 million barrels. Now, there are even ships taken out of the fleet to be utilized in storage purposes.
Furthermore, there is news of two tankers transporting cargoes of diesel-type fuel from India to the Europe changing the course and now sailing for New York where there is more storage available. Also, another jet fuel tanker sailed for the Europe also has been diverted to the US.
Thus, the world has now opened eyes to protect and preserve the available resources until the production systems resume within a while.
In a situation in which the mankind is alarmed of several threats followed by the COVID-19 pandemic, let us pray that a crisis of crude and refined oils would not add to them.