Near 100 mln bbls oil stored at sea

Oil companies are storing close to 100 million barrels of crude oil at sea, the highest in recent times, Frontline , one of the world’s biggest independent oil tanker owners said on Wednesday.

An oil market structure known as contango — when oil for prompt delivery is cheaper than oil for later delivery — has encouraged high levels of oil storage by trading firms for some months. Contango provides an incentive for traders to buy now and sell later.

Falling freight rates, helped by an oversupply of vessels during the global economic downturn, have also meant that oil companies have resorted to leasing ships to store oil.

Asked how much oil was floating on the seas, Frontline’s acting chief executive Jens Martin Jensen told Reuters: “It’s probably close to 100 million barrels… I’m talking about only crude.”

“Three months ago it was probably close to 50-60 million barrels and then of course 12 months ago maybe there was nothing in storage where the oil price was,” he said in a telephone interview.

Reuters