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[AMSTERDAM] The cost of renting oil tanks in Europe has risen by some 30 per cent since 2014, industry experts said on Tuesday, as the global glut of crude and products led traders to scramble for space.
While traders and refiners with long-term leases on storage sites across Europe could be protected from the biggest price spikes, those looking to rent new space were in for a nasty surprise when they entered the market.
"You can add 30 per cent to every terminal," said Patrick Kulsen of industry analysts PJK International.
"The profit (from storing oil) is going up, so everyone is looking." Kulsen said precise costs varied by terminal and product, but that the cost of renting tanks to store gasoil, as an example, had gone from around 2.25 euros ($2.45) per cubic metre per month in 2014 to above 3 euros today.
Crude oil prices have dropped nearly 75 per cent over the past 18 months due to a global excess driven by the US shale boom. This has led refineries worldwide, fattened by growing profitability from processing cheap crude, to run at full steam.
The refined diesel, gasoline, jet fuel and other products pumped out as a result, along with millions of barrels of excess crude oil, put current prices for them at a discount to prices in the future - a market structure known as contango.
As a result, oil traders were eager to rent tanks where they could park their crude and products in order to sell them later, when prices are expected to be higher. "It's all across Europe," said Krien van Beek, owner of RVB Tank Storage Solutions, a global storage broker. "As soon as the occupation rates rise, rates go up." Van Beek said about 90 per cent of tank space across Europe had been rented, leaving little for anyone coming late to the game. In other years, the occupancy rates for tanks have been as low as 70 per cent, she added.