Global storage constraints are limiting the ability of most countries to stockpile more oil this year while China prepares to enlarge its reserves, the energy chief of the world’s third-biggest economy said.
“Crude stockpile facilities at most countries have been fully filled in the first half,” Zhang Guobao, director of the National Energy Administration, said in Beijing today. “It will be difficult for those countries to greatly increase crude reserves in the second half as they did in the first.”
Oil’s slump in New York from $147.27 a barrel last year has boosted fuel purchases for stockpiling. Even tankers are now being used for storage because of limited on-land capacity, Zhang said. Since November, crude has risen 52 percent to as high as $68.29 a barrel -- still at a discount of more than 50 percent to the historic peak.
“The crude price increases earlier this year could have been partially triggered by increased stockpiling by countries including China,” Yin Xiaodong, an oil analyst at Beijing-based Citic Securities Co., said by phone today.
A substantial portion of the crude-oil trade in the first half was because of increased global stockpiling, Zhang said at a media briefing today. Those importing countries weren’t actually consuming the oil they bought, he said.
“Analysts should pay attention to this phenomenon when predicting the future trend of oil prices,” Zhang said.
Time Magazine also has this:
Oil demand in rich countries has crashed since the onset of the economic crisis last year, and is now at its lowest level since about 1981, according to the Paris-based International Energy Agency. U.S. oil inventories — the stored surplus — this month reached their highest level since the 1980s. And about 2.6 billion barrels are currently stored in commercial tankers around the world. "There is some risk we will run out of storage space in the next four to six weeks," says Simon Wardell, director of global oil at IHS Global Insight, an energy-forecasting company in London. To oil-rich countries that possibility evokes grim memories of 1998, when the Asian economic crisis sent demand plummeting, driving world oil prices down to $10 a barrel. "If we run out of storage it could prompt a collapse in the price," says Wardell.
And a few weeks back even the Oil Drum posted this:
My analysis indicates that in recent months, as much as 2 -3 Mb/d of global petroleum supply has been used to build inventories. This is about to come to an end, because available storage is getting closer and closer to full and contango has begun to flatten. When additions to storage cease, the resulting drop in demand can be expected to lead to substantial downward pressure on oil prices.
Brewskie comment: For the record, I hardly think $60-something oil is expensive, nor do I view oil in the $70- or $80-range expensive. My lifestyle is of such that I always attempt to minimize my driving. Even in the face of last year's oil prices, it hardly hit me: my non-hybrid Civic squeezed 44 mpg last summer on a road trip - with the air conditioning on! So I'm not fretting about this, it's that something shady seems to be up considering the glut sitting in storage, and memories of last year's Wall Street raid.
Added: Naturally, the shitty dollar isn't helping.