Global IT outage in July exacerbated fuel storage problems in California, storage broker says By Reuters

By Shariq Khan

NEW YORK (Reuters) – Last month’s CrowdStrike (NASDAQ: ) IT outage that grounded dozens of flights created new problems for the California fuel market, forcing U.S. traders to store the state’s fuel on water tankers, the broker said storage The Tank Tiger for Reuters. this week.

The outage exacerbated existing constraints on oil storage in California, where policies aimed at ending the use of fossil fuels have made it difficult to build new oil and gas infrastructure.

“When it comes to storage of petroleum products in California, there has been no room at the inn for several years,” Ernie Barsamian, founder of U.S. terminal storage clearinghouse The Tank Tiger, said Wednesday.

But California’s location on the west coast of the US makes it an important trading center for oil, keeping demand high. This opens up the region to huge fuel price shocks during periods of disruption, such as IT outages or refinery problems.

“Despite the prevailing demand, permitting for new storage tanks (in California) is a cumbersome process,” Barsamian said. As a result, storage costs in California are twice as high as shopping centers in New York Harbor or Houston, he said.

California’s Certified Unified Program Agency, responsible for implementing the state’s Aboveground Petroleum Storage Act Program, did not immediately respond to a request for comment.

When the flights were grounded in July, the unspent fuel could not find a home in California and had to be repositioned at locations on the water off the coasts of Houston and New Orleans, Barsamian said.

Merchants only use ships as storage as a last resort when onshore storage is full or unavailable, as keeping ships in use further delays their voyages, narrowing the market and increasing costs.

Stockpiles of jet fuel in onshore tankers dotting the US West Coast rose to more than 12 million barrels in the week ended July 26, a record high. The CrowdStrike outage began on July 19.

Strong demand for the product has seen imports from the West Coast rise significantly this year, analysts at vessel tracking service Kpler said. This has kept stocks higher than normal this year.

West Coast imports from within the U.S. and abroad have averaged about 135,000 bpd this year, about 25,000 bpd more than last year, Kpler data showed.

West Coast jet fuel inventories were 11.8 million barrels last week, up nearly 28 percent from last year.