February 15, 2021 [Bloomberg] – Oil storage locations across the Americas are emptying as the remarkable rally in crude prices undermines the need to buy and stockpile barrels.

Tank owners were one of the few benefactors from last year’s collapse that spurred traders to buy crude cheap, store it, and then sell into a rally. Now that the market and shifted into backwardation, where oil for prompt delivery is priced higher than later-dated contracts, it’s making storage unprofitable. Gulf Coast terminal operators are offering to lease tanks at less than half the rate at the height of the storage boom in 2020.

The rapid draining of the tanks underscores the remarkable turnaround in oil prices less than a year after West Texas Intermediate futures settled below zero for the first time. The rebound can be attributed to aggressive supply cuts from OPEC and its partners, falling output in the U.S. and resilient demand in Asia.

This year, about 1.9 million barrels of crude storage become available at St. James and Gibson in Louisiana and Beaumont in Texas, said Steven Barsamian, chief operating officer at The Tank Tiger, an independent storage brokerage. “This is the most amount of storage we’ve seen up for rental in at least a year,” he said.

Crude inventories in Cushing, Oklahoma, and on the U.S. Gulf Coast have sunk to the lowest levels in more than six months. Some terminal operators aren’t seeing leases getting renewed once the users clear out supplies.

“So far, leases aren’t getting renewed mainly in Texas and Louisiana, but it might start to happen soon at the Cushing hub,” Barsamian said.

When traders locked in storage deals a year ago, the oil market was in contango, a bearish structure where prices for near term oil supply traded at a discount for future delivery, meaning traders could hold on to crude to sell it at a later date for higher prices. Now, West Texas Intermediate futures have climbed 20% so far this year to settle at $58.24 a barrel on Thursday and the front-month March contract has traded as high as 16 cents premium April futures last week.

Storage tanks in the Caribbean and Canada are also draining:

• More than 1 million barrels of storage has become available in Alberta, according to Barsamian, even as Canada’s oil production has recovered to record levels
• Stockpiles in the Caribbean have fallen more than 6 million barrels from the peak in October, according to data from Ursa Space Systems
• Cul de Sac in St. Lucia saw stored volumes drained about a third to about 6 million barrels

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