Oil prices slump again as fears over storage mount
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LONDON • Oil prices slumped again yesterday on concerns over scarce storage capacity, especially in the United States, and global economic doldrums from the coronavirus pandemic.
US oil futures led losses, falling by more than US$3 a barrel on fears that storage at Cushing, Oklahoma, could reach full capacity soon.
US West Texas Intermediate (WTI) June futures fell US$3.61, or 21.3 per cent, to US$13.33 a barrel by 1215 GMT. Brent crude was down US$1.17, or 5.5 per cent, at US$20.27 a barrel. The June Brent contract expires on Thursday.
Oil futures marked their third straight week of losses last week, with Brent ending 24 per cent down and WTI off about 7 per cent.
Prices have now fallen for eight of the past nine weeks.
US crude inventories rose to 518.6 million barrels in the week to April 17, near the record 535 million barrels set in 2017.
The oil glut has caused storage options worldwide to dwindle as onshore tanks fill to capacity, prompting traders, refiners and infrastructure companies to seek alternatives such as pipelines and ships.
The Singapore Strait, for example, has become even more congested as oil-laden tankers wait out the slump in global fuel consumption.
About 60 clean fuel tankers are currently anchored along the busy strait, up from the usual 30 to 40 ships, according to IHS Markit head of commodity analytics and research Rahul Kapoor.
Some vessels are being used to hoard fuel at sea as onshore tanks fill up. Others are probably parked, waiting to be redirected to willing buyers across Asia and the world.
Ships filled with petrol to jet fuel are moving from major refinery hubs such as South Korea and China due to a crash in domestic demand and swelling stockpiles.
These tankers are finding their way to the Singapore Strait, where the glut is being compounded by offloading delays in the city state.
Vessels currently have to wait about two weeks to discharge cargoes in Singapore, compared with the typical four to five days, according to shipbrokers and traders, leaving ships stranded in local waters.
"Major fuel-exporting countries are facing difficulties finding homes for their surplus barrels," said Ms Sri Paravaikkarasu, Asia oil head at industry consultant FGE.
In Singapore, crude processing rates at refineries have probably dropped to around 60 per cent of capacity, she said.
REUTERS, BLOOMBERG