October 05, 2018 [S&P Global Platts] - The Louisiana Offshore Oil Port sold just over half of the 8,000 capacity allocation contracts it offered in its Tuesday auction of storage space for crude in cavern at its terminal, equal to about 4.5 million barrels of LOOP Sour, auction cohost Matrix Markets said.
Buyers picked up 4,500 CACs in the auction, or 56% of the total offered. That is down from 72% in the September auction and is also lower than the 12-month average of 64%. All of the CACs sold were for storage in 2019, with no buying interest meeting the minimum price of 5 cents/b for November or December.
Each CAC gives the owner the right but not the obligation to store 1,000 barrels of LOOP Sour for the contract month.
Although the total number of CACs sold is lower than in recent months, there appears to be somewhat higher interest in the individual contract months.
LOOP sold 69% of August CACs and 65% of September CACs before those contract months; however, LOOP sold 76% of October and November CACs available. The next front-month contract up will be December, of which 71% of CACs have sold so far.
The market continues to value the CACs at the minimum bid of 5 cents/b. All CACs sold in the past two auctions have been at 5 cents/b. This year, prices have ranged 5-8 cents/b, Matrix data show. That is unsurprising given the backwardated global oil market at the moment, which proves a disincentive for crude storage.
The market structure for LOOP Sour in September was 70 cents/b backwardated on average in September, S&P Global Platts data showed. That compares with 16 cents/b and 21 cents/b backward in July and August, respectively. LOOP Sour was last in contango in March-May, which is also the last time it would have been economic to store LOOP Sour and sell forward.
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