The world is swimming in oil, now that rigs in the U.S. are pumping at levels not seen in decades. A side effect of that oil glut? Storing the stuff is getting a little difficult.
Now, some trading firms are sending their oil out to sea, hiring supertankers to store supplies until prices come back up, Reuters reports.
It's not as profitable to sell oil at recent prices of under $50 a barrel. So instead of booking less income, Shell and other companies are opting to hold oil in storage for at least the next several months.
Some of these supertankers have huge capacities. The T1 Oceana Ultra Large Crude Carrier can hold up to 3 million barrels of oil, Reuters reports. It's one of the largest ships in the world. Other tankers can hold 2 million barrels.
How much does it cost to hire these ships? Prices for some carriers have doubled since October to between $55,000 and $60,000 a day, according to trade magazine Ship & Bunker. Renting these supertankers is a risk, one that gets more expensive every day. But the fact that companies are willing to pay that much is a reflection of both how low crude prices have fallen and how high expectations are for a rebound.
Oil and fuel stockpiles rose to record highs last week, according to government data. In the U.S., levels of crude oil, refined fuels and other kinds of petroleum hit 1.149 billion barrels. That doesn't count the emergency supplies in the U.S. Strategic Petroleum Reserve.
The ocean isn't the only place to store oil, to be sure. In fact, floating storage isn't normally a popular option, because ships tend to deteriorate when they are kept at a standstill, Ship & Bunker reports. But beggars can't be choosers in an oil glut.
Oil is also stored at facilities in Cushing, Oklahoma, coming in through pipelines from Colorado, North Dakota and Canada. Supply levels are inching up there and are expected to go higher this year, The Wall Street Journal reports. The commodity is also stored in smaller amounts in tanks around the country.
Other countries are also ramping up their oil storage facilities as the price of crude searches for a bottom. A 39-year-old Nigerian millionaire has just signed an agreement to build one of the largest oil storage terminals in Africa, Forbes reports. And the stock price of China Shipping Development, a Chinese company in the crude oil tanker business, has been on a tear recently, with analysts guessing that the ships will be used more for storage than for transport in coming months.