Oil traders rent S.Korean storage for excess supplies after virus hit China demand

LONDON/SINGAPORE, Feb 17 (Reuters) - Several top trading houses have rented millions of barrels of crude storage in South Korea this month to keep excess oil supplies after the coronavirus outbreak dampened demand in China, the world’s largest importer, trading sources said.

Supplies in the region are piling up after Chinese refineries cut output by about 1.5 million barrels per day (bpd) over just two weeks.

Trading firms Trafigura, Glencore and Mercuria as well as the trading division of French oil major Total have rented close to 15 million barrels of storage tanks from South Korea’s state oil firm Korea National Oil Corp (KNOC), they said.

The traders took on new storage leases for over three or six months with a contango market structure - in which longer-dated oil futures trade at a premium - defraying some costs while they waited for a rebound in demand after China recovers from the outbreak, the sources said. (Reporting by Julia Payne and Dmitry Zhdannikov in London and Florence Tan in Singapore; Additional reporting by Jane Chung in Seoul; Editing by Himani Sarkar)