Oil imports into the Gulf of Mexico
region surged to a record last week as the profits from floating
storage evaporated, pushing traders to unload their cargoes and
forcing crude futures lower.
The price advantage for traders who buy oil and store it at
sea for a month instead of delivering it immediately has shrunk
90 percent since May. Floating storage in the Gulf dropped 24
percent in the week ended July 23, Bloomberg data show.
“What was going on last week was dumping the crude,” said
Tim Evans, an energy analyst at Citi Futures Perspective in New
York. “The spread is putting pressure on those holding
inventories on tankers to move it ashore.”
Stockpiles unexpectedly rose 7.31 million barrels, or 2.1
percent, to 360.8 million in the week ended July 23, confounding
analysts who predicted inventories would fall 1.73 million
barrels, or 0.5 percent, to their lowest level in four months. A
surge in imports to Gulf states contributed to the glut, Energy
Department figures showed July 28.
Crude fell as much as 2.1 percent to $75.90, a one-week
low, on July 28 after the Energy Department reported inventories
climbed, settling at $76.99. Futures fell 63 cents, or 0.8
percent, to $77.73 at 11:23 a.m. today on the New York
Mercantile Exchange.
U.S. imports rose 1.18 million barrels, or 12 percent, to
11.2 million, the highest level since the week ended Aug. 25,
2006. The bulk of the imports, 65 percent, went into states
along the Gulf of Mexico, compared with 55 percent of imports
the week before. Oil stored at sea in the region fell 13.9
million barrels to 29.6 million barrels, the week ended July 23.
Gulf Imports
Imports into Gulf states averaged 7.212 million barrels per
day the week ended July 23, the highest since the Energy
Department began tracking data in 1990. Supplies in the region
jumped 8.18 million barrels, or 4.6 percent, to 184.6 million.
Prices for later-delivery have been higher than those for
front-month contracts since November 2008, making it profitable
to buy and store crude at sea. The discount, or contango,
between the two contracts nearest to delivery has declined $4.11
to 48 cents at 11:25 a.m. today on the Nymex since reaching this
year’s peak of $4.59 on May 13.
“In terms of simple economics, the trade doesn’t make the
same sense as it did three or four months ago, or as it did a
year and a half ago when this trade got really big,” said Mike Reardon, vice president at Imarex Inc., a freight-derivatives
broker, in Houston.
Crude Storage
The amount of crude held on very large crude carriers hired
for long-term storage has fallen 73 percent this year to 11
million barrels as of July 29, according ICAP Shipping
International Ltd. The Otina, a tanker with a capacity of about
2.4 million barrels chartered by Royal Dutch Shell Plc, unloaded
in the Gulf this week, said Simon Newman, a senior tanker
analyst with ICAP in London.
“The contango has come out of the market,” said Andy Lipow, president of Lipow Oil Associates LLC, a consulting
company based in Houston. “So it doesn’t make any economic
sense to hold barrels in inventory, especially on the water
where storage is currently higher than it would be on land.”
To contact the reporter on this story:
Asjylyn Loder in New York at
aloder@bloomberg.net.
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