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Oil producers running out of storage space
Key Excerpts from Article on Website of MSNBC/Associated Press
Posted: March 14th, 2009
http://www.msnbc.msn.com/id/29495753
Supertankers that once raced around the world to satisfy an unquenchable thirst for oil are now parked offshore, fully loaded, anchors down, their crews killing time. In the United States, vast storage farms for oil are almost out of room. As demand for crude has plummeted, the world suddenly finds itself awash in oil that has nowhere to go. Its been less than a year since oil prices hit record highs. But now producers and traders are struggling with the new reality: The world wants less oil, not more. And turning off the spigot is about as easy as turning around one of those tankers. So oil companies and investors are stashing crude, waiting for demand to rise and the bear market to end so they can turn a profit later. Meanwhile, oil-producing countries such as Iran have pumped millions of barrels of their own crude into idle tankers, effectively taking crude off the market to halt declining prices that are devastating their economies. Traders have always played a game of store and sell, bringing oil to market when it can fetch the best price. They say this time is different because of how fast the bottom fell out of the oil market. Nobody expected this, said Antoine Halff, an analyst with Newedge. The majority of people out there thought the market would keep rising to $200, even $250, a barrel. They were tripping over each other to pick a higher forecast. Now the strategy is storage. Anyone who can buy cheap oil and store it might be able to sell it at a premium later, when the global economy ramps up again.
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