Oil Storage, the Crude Reality?
Jason Lubin April 21, 2020 2:48 PM
Is the lack of oil demand going to help marine storage facilities?
The travel bans and national lockdowns caused a massive demand shock to the energy sector as a result of the COVID-19 pandemic. According to the EIA, in the first quarter (January 1st to March 31st) of 2020 roughly 94.4 million barrels of oil were used per day, which means that approximately $1.9 billion dollars worth of oil was used per day at an average of $20.00 per barrel.
Oil is the backbone of today's global economy and is used in the life cycle of almost every product. As a society we rely to heavily on oil to cut production by a significant amount, and in some countries economies depend largely on the energy sector, including a few OPEC members. With the idea that oil will be building up until demand returns, there may be a way to take advantage of growing oil reserves. Once land based storage facilities fill up, the next method would most likely be storing the oil on a marine vessel until delivery.
Scorpio Tankers Inc. (STNG) is an energy marine transport company based in the Republic of the Marshall Islands. The company's market capitalization is 1.3 billion dollars. Looking at a daily chart, the RSI is above its neutrality area at 65. Price is above both the 20 day and 50 day moving average. Price recently broke out of a 3 month downtrend and entered an uptrend based on its market structure of higher highs and higher lows. Price could continue upwards to test $24.80 or possibly retrace back to about $20.08. In the event of a pullback, if price were to bounce at roughly $20.08, it would confirm the breakout. If price drops below $20.08, it may be headed back down to $16.61. The company is set to report first quarter earnings on May 1st.
Source: GAIN Capital, TradingView
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.