Record global oil stocks are unlikely to start drawing down for at least a year, but there is still space to store oil, the International Energy Agency said. Global tanks are not yet full, though the West's energy watchdog said the "breakneck" pace of oil supply growth would outstrip demand that is expanding at its fastest clip in five years.
"While it has been suggested that inventories are approaching tank tops, pricing signals indicate this is not the case," the agency said. When market oversupply is extreme, immediate prices can collapse so dramatically relative to futures prices that it becomes profitable to buy oil now and store it for later - even on ships at sea. This price structure is known as "contango".
While inventories in the developed world reached a record 2.9 billion barrels in June, the forward futures curve suggests there is still more space available, the Paris-based IEA said.
"If storage was brimming, the prompt price would weaken faster than at the back of the curve to a level which would encourage storing oil on tankers at sea - a so-called 'supercontango'," the agency said.
The spread between current Brent prices and those three months from now is just over $1.30 per barrel. The last 'supercontango' that began in 2008 saw that spread widen to as much as $8 per barrel.
The IEA, which warned last year that stocks could bump up against capacity limits, pointed to two new strategic petroleum reserve sites with an estimated 50 million barrels of storage space in China, at Huizhou and Jinzhou, as possible outlets.
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