The jury is still
out on whether OPEC can rein in a global oil glut but top commodity
traders are betting it can by selling stakes in storage tank businesses
that profited from oversupply.
Since January, Glencore, Vitol and Gunvor have completed or have been seeking to sell parts of their holdings in storage firms.
Vitol's deal was agreed in October, before the Nov. 30 announcement by the Organization of the Petroleum Exporting Countries that it would cut output from Jan. 1. Vitol's deal was completed in January, and others have lined up sales since.
The five top traders, who also include Mercuria and Trafigura, expect OPEC to extend output cuts into the second half of 2017, which would help draw down global inventories.
When inventories are plentiful, the oil price for future delivery tends to be above the price for prompt delivery, a state known as contango, when it pays to be in the storage business, taking fees and selling stored oil forward at a profit. This has been the situation since mid-2014.
At times, the prompt price was more than $1 less than a barrel for delivery a month later. With an abundance of crude supplies, trading houses could book easy profits by buying crude and storing it after selling it forward.
As stockpiles draw down, the oil price for prompt delivery tends to trade above future prices, a condition known as backwardation. At this point, oil cannot be sold forward at a quick profit and the storage business loses its luster.
Till now, there have been few clear signs that OPEC and non-OPEC cuts of 1.8 million barrels per day (bpd) were working, with global stockpiles stubbornly high, according to U.S. data and International Energy Agency (IEA) figures.
Vitol's deal was agreed in October, before the Nov. 30 announcement by the Organization of the Petroleum Exporting Countries that it would cut output from Jan. 1. Vitol's deal was completed in January, and others have lined up sales since.
The five top traders, who also include Mercuria and Trafigura, expect OPEC to extend output cuts into the second half of 2017, which would help draw down global inventories.
When inventories are plentiful, the oil price for future delivery tends to be above the price for prompt delivery, a state known as contango, when it pays to be in the storage business, taking fees and selling stored oil forward at a profit. This has been the situation since mid-2014.
At times, the prompt price was more than $1 less than a barrel for delivery a month later. With an abundance of crude supplies, trading houses could book easy profits by buying crude and storing it after selling it forward.
As stockpiles draw down, the oil price for prompt delivery tends to trade above future prices, a condition known as backwardation. At this point, oil cannot be sold forward at a quick profit and the storage business loses its luster.
Till now, there have been few clear signs that OPEC and non-OPEC cuts of 1.8 million barrels per day (bpd) were working, with global stockpiles stubbornly high, according to U.S. data and International Energy Agency (IEA) figures.
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