Oil traders are emptying one of the world’s largest crude storage facilities, located near the southernmost tip of Africa, as the physical market tightens amid booming demand and OPEC production cuts, Bloomberg reports.
Total SA, Vitol Group and Mercuria Energy Group Ltd. are selling crude they hoarded in Saldanha Bay, South Africa, during the 2015-2016 glut when the market effectively paid traders to store oil, according to people familiar with the matter. Crude demand is now seasonally outstripping supply, tightening the physical market for some crude varieties to levels not seen in the last two years and encouraging traders to sell their stored oil.
Saldanha Bay is one of the world’s largest crude storage facilities, with the capacity to hold 45 million barrels in just six gigantic, partially-buried concrete tanks. Mercuria, which operates a blending operation at the South African terminal, has been offering cargoes from the facility, with China the likeliest destination. Total has also been seeking tankers primarily to load Nigeria’s Escravos crude from its tank in Saldanha Bay. In addition, Vitol has been unwinding its crude stores at both Saldanha Bay and in northwest Europe.