What costs more than $25 million dollars, can hold 1.1 million barrels of oil and known as the Bayou State? That’s correct. The 3 new above ground oil tanks added to Clovelly Hub by The Louisiana Offshore Oil Port (LOOP). Currently, LOOP has 60 million barrels underground capacity, and once construction is finished, their final above ground storage will be 10.1 million barrels.
According to Don Briggs, president of the Louisiana Oil & Gas Association,of low oil prices and will benefit the state of Louisiana. As reported by The Associated Press, published on NOLA.com, Briggs said, “What drives a lot of this new storage — not just here, but in other parts of the world — is the fact that oil prices are so low. When you have cheaper oil prices, it’s a good time to be able to buy, but it doesn’t do you any good to buy if you don’t have a place to put it.” The new oil tanks are meant to meet this increasing demand for storage.
Not all oil storage centers are created equal, especially when it comes to price. Increased demand has led to increasing monthly prices per barrel. With oil prices already hitting alarming lows, companies are struggling to minimize their costs. Enter LOOP, which is already one of the largest oil trading and distribution facilities in the US. Their affordable prices make them the obvious choice for companies looking to store a surplus of crude oil domestically.
As reported by the Advocate, “It’s all part of the bizarre oilscape, where the glut of domestic oil has made storage space a valuable commodity. Here’s why: Futures contracts for oil are selling for about $10 a barrel more than the current price. For example, the contract for oil to be delivered in April 2016 is nearly $58 a barrel. The U.S. benchmark price has been under $50.”
What this means is that as long as storage facilities offer cheap rent, it literally makes “cents” to store crude oil for future sale at higher prices.