Saudi crude shipments to compound US storage woes

At least 18mn bl of Saudi crude is on track to arrive next month in the US, where already-swelling stocks helped push WTI crude futures into negative territory yesterday.

State-controlled Aramco's shipping arm Bahri chartered at least nine very large crude carrier (VLCC) tankers — each capable of transporting around 2mn bl — for delivery to the US Gulf coast when the country ramped up its supply in March. The nine are broadcasting expected arrival dates between 1 May and 22 May, and none have changed direction.

The contango structure on the crude forward curve is encouraging traders to seek storage in the hope of capturing higher prices in the future. This, coupled with sharply lower demand arising from measures to tackle the Covid-19 pandemic, is rapidly filling tank capacity. US crude inventories totalled 503.6mn bl, or 57pc of capacity on 10 April, so Bahri's May deliveries alone could account for 2pc of the US overall storage capacity.

Concern about reaching capacity played a large role in yesterday's descent by the Nymex WTI May light sweet crude futures contract to below zero for the first time. The May contract expires today. The June contract was just above $16/bl in early US trade today.

The price collapse has prompted calls from US senators representing oil producing states to call either for tariffs on Saudi and Russian imports or for the Saudi tankers to be barred from unloading in the Gulf. There, US exporters are loading tankers with seemingly no designated buyer.

By Simon Ferrie