The global oil supply glut has already dragged prices to multi-year lows and is now causing huge traffic jams at some of the world’s largest ports.
According to Reuters, a sharp increase in the number of oil supertankers moving crude to the Middle East and Asia is creating huge traffic jams at major ports costing about $6.25 million per day.
The congestion has also caused delays as long as one month, throwing off delivery schedules and eating into profits.
Head of research at shipbroker Banchero Costa Ralph Leszczynski told Reuters the tanker traffic jams are being driven by “a perfect storm of red-hot demand from new entrant refineries in China and port infrastructure in the Middle East and Latin America that is unable to cope.”
The queued supertankers are holding an estimated 200 million barrels of crude worth about $7.5 billion at current prices, Reuters said.
If the ships waiting to offload their cargoes were lined up end-to-end the line would stretch out over 20 nautical miles, Reuters added.
According to the U.S. Energy Information Administration, OECD commercial crude oil and other liquid fuels inventories totaled 3.05 billion barrels at the end of 2015, equivalent to roughly 66 days of consumption.
OECD inventories are forecast to rise to 3.22 billion barrels at the end of 2016 and are expected to hit 3.25 billion barrels at the end of 2017.
Crude prices have fallen by about 6 percent since the middle of the week as investors wait to see if a production freeze deal materializes at an OPEC meeting to be held this weekend in Doha.
Surging Iranian production helped push total OPEC production to over 32 million barrels per day in March.
Iran has been reluctant to endorse a production freeze deal as it looks to regain market share now that Western sanctions have been lifted.
“Neither Iran nor Iraq has made firm commitments to the Doha talks on April 17, but their collective stance could be a decisive element regarding any agreement over a production freeze,” Platts senior editor Eklavya Gupte said earlier this week.
U.S. crude production dipped by 90,000 bpd month-over-month to an average of 9 million bpd in March, according to the EIA.
A production decline in the Lower 48 is expected to push U.S. production down to an average 8.6 million bpd in 2016 and 8.0 million bpd in 2017, a drop of about 100,000 bpd from the EIA’s February forecast.