US oil storage companies witness record capacity demand

US oil storage companies are seeing record demand for their storage facility services, yet, they don’t seem to be making the cut as far as profits from their services are concerned.

The record demand seems to be a case of oil companies simply storing their output in anticipation of suitable, upward revisions in the prices of crude oil and petroleum products. The prices, in turn, depend on increase in demand for crude oil and refined products. The uncertainty in the global economy coupled with credit crunch is adding to the dilemma faced by these companies.

Crude oil inventories in the US are at a 16 month high with the demand for fuel falling to its lowest in five years, across the country. On January 14, 2009, futures trading in crude oil dropped to $37.28 a barrel on the NYMEX, its lowest since December 24, 2008. Overall, futures trading in crude oil on the NYMEX is taking place at 60% less than the rate, exactly a year ago.

Unless both the demand and prices of crude oil increase, most companies are expected to keep their inventories on hold. The global oil industry is witnessing a paradoxical scenario. While reduced demand and prices are leading to increased inventories, swelling inventories and weakened demand in the midst of a global economic slump are weighing down heavily on crude oil and petroleum product prices.

Tags:  demand, oil companies, storage, US