U.S. Fuel Traders Ditch Storage as Holding Product Poses Risk
- Less fuel in tanks means supplies prone to squeezes, spikes
- Fuel storage tanks now cheaper to rent in Gulf Coast, New York
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Traders of physical fuel in the U.S. are abandoning their annual storage contracts as holding onto products has become a losing proposition given current pricing structures.
Futures markets for diesel, jet fuel and gasoline shifted into wide backwardations -- conditions in which future deliveries are priced lower than prompt levels -- after Russia’s invasion of Ukraine tightened global oil supplies and sent prompt prices surging. The backwardations are easing this month, but it remains true that fuels are losing value every day inside a storage tank.