I've had some great interactions with readers lately, be it via blog comments or on Twitter. These discussions inevitably spur on a topic or two to dig into. Hence a recent blog comment has prompted this reply. Hark Och aye, read on!
An article published last September said that various trading houses were selling crude from the storage hub after the market had flipped into backwardation (when near-term prices are higher than those further into the future), disincentivizing crude storage – be it onshore or offshore (aka floating storage).
At that time, crude leaving the storage terminal was as elusive as the Loch Ness monster.
That said, come November, our ClipperData showed a sudden spike in export loadings from the storage terminal. After exports averaged 590,000 bbls a month through the first ten months of 2017, November's export loadings jumped tenfold to 5.9 million bbls. This was swiftly followed by strength in December, this time of 5.7 million bbls.
Just as quickly as exports popped their head up, they disappeared again. We have seen no further export loadings out of Saldanha Bay since, leaving our chart to look reminiscent of the aforementioned Nessy.
While only 1.24mn bbls left storage in Saldanha Bay in 2015, and 2.1mn bbls in 2016, total exports last year reached nearly 18mn bbls, with two-thirds leaving in the final two months of the year.
As storing crude became uneconomic, opportunistic purchases were a-go-go. The vast majority headed to East Asia, with China the leading destination, accounting for over 60 percent of the volume. Taiwan also received a few cargoes, while the US has received one: 530,000 bbls to Citgo's Corpus Christi refinery on January 10.
The Financial Times reported last week that Saldanha Bay storage had been emptied, according to Vitol's Chris Bake, quoting him saying 'stockpiles at important oil storage hubs such as Saldanha Bay in South Africa have been “emptied” and crude stored on tankers at sea, such as off the coast of Iran and Singapore, is “all gone.”
While we concur that floating storage off the coast of Iran has been drawn down (something that was almost complete by April of last year), the reports of the demise of floating storage off Singapore appear greatly exaggerated. Although it has more than halved since mid-last year, we still see around 30 million barrels of crude waiting offshore in the region.