The Newest Commodity: Oil Storage Space

U.S. crude-oil storage tanks are filling rapidly, with inventories posting their largest gain in nearly 14 years last week. The cost to store oil is also rising, as tank space becomes scarce in some regions. Gulf Coast storage is at an all-time high of 219.9 million barrels, the U.S . Energy Information Administration said Wednesday, which is about 77% of capacity. Perhaps coincidentally, CME Group Inc. said Wednesday that it’s starting a new futures contract to trade – what else? – Gulf Coast crude-oil storage. CME owns the New York Mercantile Exchange. The exchange operator says this is the first-ever oil-storage futures contract. It will work like this: At the beginning of every month, a 30-minute online auction will be held through brokerage NEO Markets Inc. In the auction, LOOP LLC – known to many as the Louisiana Offshore Oil Port – will sell 7,000 contracts. Each contract will give the buyer the right, but not the obligation, to store 1,000 barrels of sour crude oil in LOOP’s Clovelly Hub in Louisiana for a month. Once the contracts are sold through the auction, they can be bought and sold freely. At the end of the month, anyone holding a contract … continue reading

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