The news from the oil patch is, in a word, ugly.
Despite decent growth in demand, oil inventories around the globe are growing as oil producers like Saudi Arabia, Russia, and Iraq are pumping oil at record levels.
According to the International Energy Agency (IEA), inventories of crude in developed countries stand at a record three billion barrels. Global inventories are at levels not seen in at least a decade.
And those inventories continue to grow at a pace in excess of one million barrels per day. Global oil production in October alone stood at 97 million barrels per day, according to the IEA.
100 Million Barrels Floating at Sea
Many onshore oil storage facilities are nearing capacity. In response, oil traders are storing oil at sea in supertankers.
In fact, there are now more than 100 million barrels of oil floating at sea! That’s more than double the level seen earlier this year.
And these oil tankers are everywhere…
Five very large crude carriers (VLCCs) are sitting outside Chinese ports. Another 14 VLCCs are parked near ports in Southeast Asia. Each VLCC can carry about two million barrels of crude.
It’s no different here. There’s a record amount of crude oil sitting in ships off the Gulf Coast. Here’s a graphic showing the ships off the coast of Texas:
Click to enlarge
And complicating this problem, is Iran…
The Growing Oil Glut
As I’ve discussed previously, the lifting of sanctions will bring a flood of Iranian oil into an oversupplied market.
Iran supposedly has about 30 to 40 million barrels of oil sitting in supertankers near the Straits of Hormuz, ready for delivery. But its onshore oil inventory remains a mystery. Estimates range from 12 to 60 million barrels. And that’s just the tip of the iceberg.
Iran’s Oil Minister Bijan Zanganeh says Iran will wait for no one’s permission, including OPEC’s, to boost its oil exports. He said in September, “It’s our right to return to the level of production we historically had.”
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