Oil cavern space at the Louisiana Offshore Oil Port sold for 10 cents a barrel a month at an auction on Tuesday, offering a glimpse into the value of storage as domestic crude supplies swell to a record.
As Bloomberg, the sale of more than 11 million barrels of room in a cavern at LOOP LLC’s Clovelly hub in Louisiana was part of CME Group Inc.’s plan to offer the first physically delivered futures contract for oil storage. CME, the largest commodity-trading platform, listed a contract for trading this week based on the space at LOOP.
Storage contracts are trading hands for the first time as U.S. crude stockpiles reached a record 466.7 million barrels and production continued to climb to the highest level in over three decades. Banks, including Goldman Sachs Group Inc., are projecting another slide in oil prices as tanks in the U.S. near capacity and suppliers work to get rid of barrels.
“There was quite a bit of interest in it,” Terry Coleman, LOOP’s vice president for business development, tells Bloomberg. “The beauty of it is there’s full transparency for all participants.”
LOOP, the largest crude-import hub in the U.S., has about 69 million barrels of capacity in storage tanks and underground caverns.
