Oil Floating Storage to Drop as Stockpiles Peak, Barclays Says

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27 Feb 2009

The amount of oil stored in tankers at sea is likely to fall because global crude inventories may have peaked, Barclays Capital said. U.S. crude stockpiles gained 0.2 percent last week after falling slightly in the previous seven days, according to Department of Energy data. The slowdown follows an 8.6 percent rise in January, the biggest monthly gain in at least 20 years.
“The U.S. inventory situation has stabilized over the past four weeks, providing an early indication of a more global trend,” analysts led by Paul Horsnell said in the bank’s Weekly Oil Data review yesterday. “We expect floating storage to continue to be reduced with the new initiative to hold such storage being curtailed.”
Oil traders held as much as 50 million barrels of crude oil at sea at the start of February to profit from the market’s so- called contango, according to the International Energy Agency. That’s where a surfeit of supply makes prices for prompt delivery cheaper than longer-dated futures contracts. The oil is mainly in the U.S. Gulf and North Sea, the IEA said.
U.S. stockpile growth has slowed because OPEC production cuts have constrained imports and U.S. gasoline demand has started to improve, Barclays said.
The Organization of Petroleum Exporting Countries agreed on record production cuts last year to rein in excess supply created by the global economic slump. The 11 OPEC members with output quotas will cut supply 3.8 percent this month, consultant PetroLogistics Ltd. said this week.

Source: Bloomberg