Petroleum companies hoping for an end to the global oil glut just saw the light at the end of the tunnel move a lot further away, as the International Energy Agency reported that oil stockpiles have reached an all-time record of three billion barrels. US oil production has fallen by 450,000 barrels a day, but that has been dwarfed by increased output from OPEC and Russia.
Fleets of oil tankers are anchored off major terminals from Antwerp to China, waiting for storage space to open up ashore so they can unload. As tanker traffic jams grow, the amount of free tonnage to haul the oil that's still being produced shrinks. This has led to lease rates for oil tankers to skyrocket, with the daily rate of a supertanker reaching more than $76,000. These rates are paid every day, whether the tanker is en route or sitting idle. This has led lessees to ask the tankers they've rented to slow down, hoping that there will be space to unload by the time they reach port. The Financial Times estimates that globally, oil tankers are holding 100 million barrels of oil at sea.
Overabundance of Texas Tea
A November 13 snapshot of oil tankers off Galveston illustrates the problem. Every diamond is an anchored oil tanker, waiting its turn to unload. The ship icons are those lucky tankers who have unloaded, or arriving tankers taking their place at the end of the line. A tanker can have to wait two months or more to unload, while the expenses add up for the exporter.
OPEC says that the present oil glut will start to clear up later next year, as drastically lower prices force more fracking and offshore drilling companies out of business. That may be a bit too optimistic, as oil producers continue to increase production and lower prices in an attempt to balance budgets and undercut the competition. Iraq, for example, is pumping oil at the fastes rate sine 1962. 19 million barrels of Iraqi oil are heading for US Gulf ports this month. Since Iraq's extraction costs are around 15% of those for US shale oil drillers, they can offer crude below market value to score more sales.
Iran has more than double that amount, over 40 million barrels, already loaded up on state-owned oil tankers, just waiting for international sanctions to be lifted. However, with the global oil glut growing worse by the day, many people would rather those tankers stay in port.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.