Global Crude Storage
Jan. 8, 2018
Data from the International Energy Information Administration (IEA) indicates that OECD oil stocks (including strategic petroleum reserve) rose about 140 million barrels year-on-year to average 4.6 billion barrels in 2016 as Brent crude oil pricing consequently traded down nearly US $10/bbl to average US $43.50/bbl. This trend significantly changed with the turn of 2017 as OPEC led efforts to reduce crude production coupled with record refinery throughputs supported a drawdown of global storage volumes. While data for the fourth quarter of 2017 has yet to be released, when comparing the first three quarters of 2017 to the same period of 2016, we observe a 51.5 million barrel decline in storage volumes. Stock levels in the third quarter of 2017 are comparable to the third and fourth quarters of 2015, when Brent crude averaged around US $49/bbl.
For the tanker market, its extremely important to factor in floating sotrage activity on the water as the rise and fall of these volumes can impact global vessel supply. Comparing 2017 to 2016 we calculate a 31% fall in VLCC floating storage activity, mainly driven by the loosening of Iranian sanctions allowing Iranian vessels to return to the market to transport exports. Iranian storage activity peaked at 25 VLCCs in mid-2016, but has since dropped to no vessels as of December 2017. We note that activity in the greater Middle East region and Far East also declined, while floating storage in South East Asia increased by 16%. As floating storage activity falls more vessels are released into the spot market and negatively pressure rates, a contributing factor to rate declines over 2017. We discuss how 2018 will shape up in terms of floating storage in our 2018-2022 Tanker Market Outlook.
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