The line of ships waiting outside Europe’s biggest port and oil-trading hub of Rotterdam has grown to the longest in seven years as a global supply glut fills storage capacity.
There are currently between 40 and 50 tankers anchored in the waters outside Rotterdam, more than twice the usual number and the highest number since 2009, said Sjaak Poppe, spokesman for the Dutch port, told
The Wall Street Journal.
“Storage in the Rotterdam area is nearing its limits,” he said.
Crude producers have been sending ships carrying oil and oil products from the Middle East on longer routes to Europe to give their cargoes more time to find buyers. Oil has fallen to around $30 from more than $100 a barrel in 2014. Brent crude, the global benchmark, closed at $35.97 a barrel Monday in London.
Crude oil in storage tanks in Rotterdam stood at 51.3 million barrels on Feb. 19, the highest for the time of year in data starting in 2013, according to Genscape, which monitors inventories. Royal Vopak NV, the world’s largest oil-storage company, last week reported a fourth-quarter occupancy rate of 96 percent at its 11 terminals in the Netherlands compared with 85 percent a year earlier.
“This is a clear sign of the oversupply filling up storage to the brim,” Gerrit Zambo, an oil trader at Bayerische Landesbank in Munich, told
Bloomberg. “People are preferring to store oil rather than cut production. These are bearish signs.”
Analysts say that the world is still producing more than a million barrels of crude oil above demand on any given day, WSJ.com reported.
The world is so awash with oil that BP Plc Chief Executive Officer Bob Dudley said last month people will be filling up their “swimming pools” with it this year. Traders are taking advantage of a market contango, where forward prices are higher than current prices, by buying oil cheap, storing it and selling the commodity later. As onshore storage fills up, companies could start stockpiling at sea in a repeat of a strategy last seen in 2008 and 2009.
The situation in Rotterdam mirrors that in the biggest U.S. storage hub of Cushing in Oklahoma, where stockpiles are at a record high.
“In Cushing and probably Rotterdam storage is filling up very quickly,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich, Switzerland. “In China, given high oil imports, there are too many ships and the infrastructure seems not be able to handle that.”
Saudi Arabia, the world’s biggest oil exporter, said last month it won’t cut production to ease global oversupply, while Iran has pledged to increase output after sanctions were lifted in January. Still, oil climbed on Tuesday from the highest close in more than seven weeks on speculation that monetary stimulus in China could help revive flagging economic growth in the world’s second-biggest fuel consumer.
Meanwhile, the United Arab Emirates energy minister was quoted as saying that crude producers should freeze production if they cannot agree on a cut to balance the global oil market,
Reuters reported.
State news agency WAM cited Suhail bin Mohammed al-Mazrouei as saying "it is necessary to reach an agreement on a production freeze" to fix the oil market if there was a difficulty to reach a deal to cut output among OPEC members.
He said there were no calls to hold an emergency OPEC meeting, and talks happening now are about cooperation between the exporting group and others to freeze oil output.
"I believe that current prices will force everyone to freeze production.... everyone should move toward freezing production whether they like it or not," the minister said, according to WAM.
(Newsmax wire services contributed to this report).
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