A Completely Unnecessary Post -- But It Made My Day -- August 21, 2015

Updates

December 23, 2015: Vitol will be the first (?) to export US light crude oil under the relaxed rules on US exports. 
 

Original Post

 

This is one of those posts that is absolutely unnecessary but it helps me understand the global oil market. And it reminds me what contango means. It's not the Argentina national dance.

The link is here but requires a subscription. Vitol buys out oil tank partner's stake in VTTI BV for $830 million. Ah, but one can access it without a subscription through googling.

In a long note like this, there will be factual and/or typographical errors. If this information is important to you, go to the linked articles.

Some data points:

• Vitol is the world's largest energy trader
• with a purchase announced today, Vitol now has greater control of the global network of almost 400 crude oil tanks
• a glut of crude oil globally has led oil traders to look for additional space to store supplies
• access to oil storage facilities gives traders greater flexibility
• Kinder Morgan and 3i infrastructure have also bought storage facilities in recent months
• private equity players have been looking at a BP-owned terminal in Amsterdam
• futures today suggest more oil may be moved into storage, allowing tank operators to earn higher fees

Why Vitol is in the news today:

• Vitol paid $830 million for MISC Berhad's 50% stake in the VTTI BV oil storage business
• buying the Petronas-controlled shipping group's half of hte venture gives Vitol greater control over a global network of almsot 400 tanks
• VTTI currently has storage capacity of 35.5 million bbls (North America, United Arab Emirates, Amsterdam-Rotterdam-Antwerp oil hub, and in Malaysia)
• VTTI started building a new facility in Cape Town in July; South Africa has emerged as an increasingly important way station for oil, with traders able to easily flip bbls east and west from that location depending on regional demand
• South Africa's giant Saldanha Bay storage facility, 45 million bbls, was filled to capacity last month

A Bloomberg link here provides more background in a general sense. Some data points:

• storage companies include Vopak NV, Kinder Morgan, Oiltanking GmbH, Magellan Midstream
• US stock levels of crude oil at an 80-year high, 459 bbls, may soon test the limits of the US tank capacity
• RBN Energy has provided updates on new storage facilities along the Gulf Coast
• storage facilities take advantage of contango: a relatively rare situation in which forward prices are higher than current prices
• recently, the one-year forward -- a measure of contango -- stood at a minus $12.59/bbl, close to the highest since crude prices started falling last year
• generally, storage fees in the US run 20 to 50 cents/bbl/month
• Vopak: world's largest independent oil storage company; owns 210 million bbls of crude oil/refined products; enough to supply German for three months

And this post has already paid off for me. Saldanha Bay was mentioned in the Bloomberg article. Until today, I had not heard of Saldanha Bay.

This little bit of trivia should make me a hit at tonight's social event. LOL.