The UAE’s Abu Dhabi National Oil Company (ADNOC) has agreed to store crudeoil in India’s maiden strategic storage facility, sweetening the deal by saying India could take two-thirds of the oil for free.
It’s a great deal for India, which is almost fully reliant on imports to meet its crude oil needs.
India has lured Abu Dhabi in with the building of a massive underground storage facility system that will be able to take on 5.33 million tons of crude as a bulwark against global price shocks and supply disruptions.
ADNOC is eyeing half the storage capacity at one of the new underground facilities, Mangalore, which has a 1.5-million-ton capacity on its own. Abu Dhabi plans to stock 0.75 million tons, or 6 million barrels of oil, here, and 0.5 million tons will belong to India.
The deal is reflective of a wider, global storage panic and talk of what could happen when we reach ‘’peak storage’’. A number of analysts have suggested that oil prices might crash to $20, or even $10 a barrel, if storage tanks become full.
Storage is now at the highest level in at least a decade.
In the U.S., crude storage levels hit 487 million barrels in early November, closing in on the 80-year high of 490 million barrels hit earlier this year.
According to the U.S. Energy Information Administration (EIA), about 60 percent of the U.S.’ working storage capacity is filled.
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