Supertankers used to store 50m barrels of oil

Oil companies and traders are storing at least 50m barrels of oil in supertankers in a clear sign of supply outstripping demand as the global economy slows.

The surge in floating storage, – enough to meet France's oil imports for a month and the biggest since late 2001–, is likely to push the Opec oil cartel, which is due to meet on Wednesday in Oran, Algeria, to make a deeper production cut to reduce stocks. Storing oil in tankers is unusual as it is significantly more expensive than inland.

Abdullah al-Badri, Opec's secretary general, said on Monday:"Stocks are very high. We have to act. We see a very sizeable reduction [in production]."

Chakib Khelil, Opec president, said: "Everybody is supporting a cut."

Oil prices rose briefly above $50 a barrel, recovering from a four-year low of $40.50 earlier this month. Oil later traded $1.30 down at $44.95 barrel on concerns that Opec's cuts would not be enough to prevent further stock building.

Several Opec officials have suggested a 2m barrels-a-day cut, the biggest in recent history, and were also hoping to persuade Russia – the world's largest oil producer outside the cartel – to make a reduction.

But with Russia's oil output already declining because of a lack of investment, any commitment is likely to be seen as a political gesture rather than an actual reduction.

Whatever the size of Opec's cut, the floating storage surge is a clear sign the cartel is losing its battle to cut supplies more quickly than demand falls.

Jens Martin Jensens, managing director at Bermuda-based Frontline, the world's largest operator of supertankers, said that as many as 25 supertankers – each holding about 2m barrels – were being used as floating storage worldwide. Other traders suggested a similar number, pointing to companies such as BP and Royal Dutch Shell and traders such as Vitol and Koch as the holders of the oil.

Opec ministers said in November they intended to reduce developed countries' oil stocks from the equivalent of 56 days of demand to 52. But the surge in floating storage indicates that tanks are brimming, in spite of Opec's having announced 2m b/d in cuts. Indeed, inventories have risen to almost 57 days' demand.

The International Energy Agency, the western countries' oil watchdog, said the surge was the "result of abundant prompt supplies having a hard time finding customers".

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