The saga of oil continues

Iran ended all speculation on oil by clearing the air, saying that it would not be freezing production. It was purely speculation, the Canadian forest fire and Iran, which together led to a rise in price of oil, purely on sentiments. Obviously, prices have come down after Iran’s clarification and the supply gut remains.

In these very columns we have read how oil producing countries are fast running out of space and have been storing oil in containers or ships in the sea. Known as ‘Floating storage’ it is once again seeing a surge. Thus the scene now is that oil companies are rushing to banks, asking for debt to fund their floating storages.

Banks are seeing a sharp uptick in interest to finance storage charters. This storage is not happening for profit but merely as a place to store oil. If traders want to make a profit, they should hope for a price rise of oil, at least enough to pay for the new debt incurred for this storage.

A crisis always throws up new opportunities and new ideas – this is one more from the struggling-to-survive oil producing countries who HAVE TO continue pumping oil even though there are no takers.