High HOPES
2006 was the best year ever for independent terminalling, and demand remains strong. The industry is optimistic that 2007 will see further growth, though experienced operators are ready for a sudden downturn.
The current ‘super contango’ (i.e. a minimum six-month upward curve in the oil future price) and the resulting value increases in storage have contributed to an interesting year in bulk liquid storage. Most of the world’s terminalspurport to be full, and traders, producers and speculators are fighting for space.
Larger traders, such as Vitol, have gone it alone, deciding to build their own storage networks, and financial investors have seen an opportunity to use the terminal business to hedge their long-term commitments. However, this is far from signalling a limited future for independent terminalling. At a recent Stocexpo meeting in Dubai, for instance, one industry insider commented:
“We will wait until these assets [financial and traderowned facilities] return to the market, then take them on at the right price.”
In reality, independent terminalling has had its best ever year. The tight market and high oil values have assisted in a steady increase in market values and also, in many cases, in storage rates. Last September, when oil was at $75/barrel, Neil McMahon of Sanford Bernstein predicted that the cycle would change and that we would see oil at $50/barrel in 2007. His prediction was based on the presumption of false market drivers in 2006 that would be corrected this year – and, though it seemed unrealistic at the time, his prediction is coming true. But has this had any effect on storage? The answer is no.
