From Canada and the Caribbean to the Baltic and Singapore, oil tanks around the world are filling fast, despite a 50-100 per cent jump in lease costs, as oil companies and traders scramble to park unwanted crude and refined products.

Millions of barrels are struggling to find buyers among industrial users and refiners, which have cut operations as the impact of the coronavirus has destroyed demand and a Saudi-Russia market share battle has led to a flood of supply.

Oil traders estimate that petrol demand is down 50 per cent in Europe and 35 per cent in the US. While diesel is less affected, jet-fuel consumption has “virtually gone” with 6 million barrels a day lost out of a normal level of 7.3 million barrels a day.

Oil prices have buckled on foot of the coronavirus and a row between Saudi Arabia and Russia, which has led Saudi to ramp up production. Brent crude futures pinballed from $27.51 per barrel to $26.22.

As a result, fuel storage rates doubled this month in some onshore European and US hubs as traders rushed to secure tanks in the hope of selling their products at a higher price when the coronavirus outbreak eases and demand recovers.

Europe’s Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub saw the cost of storing diesel and jet kerosene rise by between 50 per cent and 100 per ent, traders and industry watchers said.

“Storage prices for gasoil doubled in the last three weeks from €2 per cubic metre per month to €4,” said Patrick Kulsen from Insights Global, a firm that tracks oil product storage and exports in the ARA region.

As most airliners ground their fleet because of the virus, jet fuel storage rates have increased by 50 per cent since before the coronavirus crisis to €3 per cubic metre per month, a source with a storage firm in the ARA region said on condition of anonymity.

The picture in the Mediterranean is similar. In the last three weeks, Barcelona storage prices rose to $3.5 per cubic metre per month from $2.85 for storage for as far out as the end of 2021, a Mediterranean jet fuel trading source said.

In Cushing, Oklahoma, the delivery point for benchmark US crude, traders said rates more than doubled to 50 cents per barrel per month from about 20 cents a month ago. Highlighting the current premium for storage, shares in Dutch storage company Vopak were trading close to their 2015 highs despite a global market rout in recent weeks. Vopak declined to comment and unlisted German storage firm Oiltanking did not respond to a request for comment.

The world is estimated to have 0.9-1.8 billion barrels of spare storage capacity - equal to nine-18 days of global supply of 100 million barrels per day (bpd) or 90-180 days to accommodate supply exceeding demand by 10 per cent or 10 million bpd.

Commodity data firm Kpler estimates the industry is using around 71 per cent of its global storage capacity and has 1.8 billion barrels of free space. UBS estimates on-land free space at 0.9 billion while Bernstein puts it at 1.6 billion barrels. But even if traders in their search for storage are willing to pay high prices, technical restrictions limit the amount available.

“Every installation will eventually have a working maximum,” Alexander Booth, head of market analysis at Kpler, said. Operational limitations can prevent full utilisation. Also, light crude cannot be stored with heavy crude, and the quality of jet and gasoline can deteriorate when they are stored. Not all storage is conveniently located and can involve the additional costs of longer shipping routes. - Reuters