The latest oil conundrum revolves on where to put it. U.S. crude oil-supplies are at the highest level in more than 80 years, equal to almost 70% of our storage capacity. Likewise, Citigroup Inc. estimates that European commercial crude storage has reached approximately 90% capacity, and inventories in South Korea, South Africa, and Japan are almost at 80% capacity. Some analysts predict that already low oil prices could continue to fall, as producers sell oil at a discount to the handful of existing buyers that have room to store it.
Accordingly, production exists at nearly 1.5 million barrels a day more crude than the world needs, as a result of decreasing demand and rising production in the U.S. If this continues, many producers may be forced to shut their wells, and store oil below ground.
As a result, storage space is now becoming a tradable commodity. CME Group Inc., plans to launch the first oil-storage futures contract on March 29. This will allow traders and producers to buy and sell the right to store specific types of oil in Lafourche Parish, La., for a defined month.