As global energy demand waned with the economic slowdown in 2007-2008, traders pumped tens of millions of barrels of oil into storage, hoping to sell them later at profit.
The trade play worked for many, as they cashed in on the rally in oil prices to a peak over $80 last year from a low of under $33 a barrel. The oil price structure in the market, when barrels for delivery in the future cost more than barrels for delivery soon and known as contango, encouraged the storage play.
The storage was likely to cost around 25 cents per barrel daily, in line with storage costs elsewhere, sources familiar with the terminal’s lease contracts said. That would imply a cost of around $5.25 million per day for the capacity that would be open for competition.
Existing lease holders included Mercuria and U.S.-based Masefield Group, who were recently acquired by European firm Arcadia Petroleum, trade sources said. Current tank holders would not be given preferential treatment once their contract expires, they said.
The crude storage facility at Saldanha Bay consists of six 7.5 million barrel concrete oil storage reservoirs.