As crude prices finally recover, storage operators in the continent are starting to see light at the end of the economic tunnel. Criselda Diala-McBride reports
For the past three years, the steep and prolonged decline of crude oil prices has put a question mark on the oil market’s immediate future. As the forward curve for the commodity flipped into full contango, terminal operators in regions like the Middle East reaped rewards.
Others were not as fortunate, however. In Africa, for example, tank storage companies faced mounting pressure. With revenues plunging, government subsidies drying up, and forex letters of credit getting harder to come by, storage businesses had been negatively affected, leading to a reduced bottom line.
But the decision by both OPEC and non-OPEC groups to freeze output – initially from January to June 2017, then until March 2018, before extending it further to the whole of next year – may brighten prospects for the continent’s bulk liquid storage sector.
With the oil production deal in place, observers believe the market may soon reach equilibrium. In early November, Reuters data notes that a six-month sweet crude spread has slipped into backwardation, a first since November 2014, prompting oil traders to pay more for immediate delivery as demand picks up.