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Oil producing country's "life and death situation": storage capacity determines oil price trend

Novel coronavirus pneumonia warned WTI that the price of the US WTI was more likely than the price of Brent crude oil, which is one of the reasons why the WTI crude oil gathering point is located inland and is 500 miles away from the nearest port, which is more affected by the global outbreak of the new crown pneumonia.

For the same reason, other benchmark oil prices in North America, including WTI midland and Western Canada, may not be immune. On April 21, WTI crude oil futures price in the United States fell to a negative value, and people speculated about the reasons behind it. In addition to the impact of the epidemic, the ups and downs of production reduction agreements between Saudi Arabia and Russia and other factors, the near top of crude oil storage capacity is also considered as one of the main reasons.

Therefore, the global crude oil storage capacity has become the focus of the industry.

The world's available oil storage capacity is in urgent need

According to energy consulting firm exinhumai, the world's available crude oil storage capacity is 1.6 billion barrels. According to past experience, the biggest impact on market prices is the inventory data of major oil consuming countries, but at present, the available storage capacity far affects the market nerves more than the amount of inventory. In fact, before the unprecedented negative value of international oil price, there was the news that the oil storage capacity was in urgent need, and the market atmosphere was tense.

According to the statistics of EIA as of April 17, excluding the US strategic oil reserve, the US oil storage capacity is only 60%. If the US strategic oil reserve is added, the US oil storage capacity is only 50%. According to the current acceleration of us oil inventory growth, it will take at least 21 weeks (including the strategic oil storage capacity) to fully fill it. However, the current oil price trend and crude oil supply speed seem to be rapidly shortening this time limit.

Due to the reduction of people's travel caused by the epidemic, the gasoline inventory in the United States increased significantly, which forced refineries to reduce production. In the first week of April, U.S. refineries produced only 12.5 million barrels a day, down 25% from a year ago, bringing Cushing's crude oil inventory to 60 million barrels soon.

Generally speaking, both the rise and fall of crude oil inventory and the level of surplus storage capacity reflect the ups and downs of the supply-demand relationship in the whole crude oil industry chain to a certain extent, but the former seems to be more inclined to the supply side, while the latter seems to be more affected by the demand side. For the current oil price situation, the United States also has many voices expressing dissatisfaction. Harold Hamm, executive chairman of continental resources, disagreed with the view that the problem of storage capacity led to the negative price of future oil, doubted that there might be market manipulation or computer problems in the Chicago Mercantile Exchange (CME), and believed that the negative price trend had a huge negative impact on the U.S. economy. He also wrote an appeal to the CFTC. But the Chicago Mercantile Exchange countered that negative oil prices were the result of a combination of the epidemic, weak oil demand, excess oil supply and high US oil inventories.

One seat is hard to find

In the whole oil and gas industry chain, crude oil storage market is unique. At the end of March, blue knight energy partners, an energy logistics company, said that its 34 oil storage tanks in Cushing had been rented out at twice the price, and its customers were Vitol group, the world's largest independent oil trading company. According to the Department of energy, the US strategic oil reserve has occupied 635 million barrels, while its total storage capacity is 797 million barrels.

In the case of land crude oil storage tends to be saturated, the industry has begun to tap the potential of oil storage sites, and oil tankers have become the first choice. The capacity of VLCC, ULCC and Suez tankers is between 1 million to 3 million barrels, which has the characteristics of storage and transportation functions, making these tankers highly sought after under special circumstances, of course, the price is not cheap. The previous daily rent was 30000 to 40000 US dollars, and now the price is "rising".

Previously, in order to occupy the market, Saudi Arabia contracted 25-40 large tankers, which increased the daily rent of Suez tankers to 110000 US dollars, and the daily rent of VLCC and ULCC reached 400000 US dollars. In addition, due to the impact of the epidemic, the crew of these oil tankers can not rotate and check normally, which also has a certain role in promoting the rise of oil tanker rents. In fact, according to the current contract signed with the shipowner for daily rent of US $100000, the monthly cost of storing and transporting crude oil on water can reach US $3 million, and the annual cost can reach US $36 million.

In addition to oil tankers, oil pipelines and tank trains have also entered the industry's search area. Although some pipeline companies do not want to occupy the pipeline and require oil companies with oil transportation needs to find buyers before they are willing to lease the "precious" space, with the continuous decline of oil consumption, it seems increasingly realistic to use the surplus pipeline network for oil storage. Energy transfer, the U.S. oil pipeline company, said its Texas pipeline could make room for two million barrels of crude oil. A head of Ukrainian national oil and gas company also suggested that crude oil should be stored in a pipeline network with a small volume of transportation, which could theoretically store up to 35 million barrels of crude oil.

In addition, North American oil and gas companies, refineries and trading companies are also considering the use of railway oil tank trains in Texas, Saskatchewan and Manitoba, and Russia is also considering the use of railway freight yards to store crude oil. Although the railway oil tank train is the most economical choice to store crude oil at present, the railway freight yard may not be located in the main oil trading center, and there are some risks related to geographical location.

Schedule of production reduction or shutdown in each country

Exinhumai


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