The UAE is offering India free oil in order to store crude there

Jessica Morris
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The world is running out of space to store oil (Source: Getty)

With millions of barrels of oil sitting in tanks and oil fields across the world, the UAE is offering India free oil in exchange for storing the commodity there.

Local media reports suggest that the United Arab Emirate's Abu Dhabi National Oil Company (Adnoc) has agreed to store crude in Indian's maiden strategic storage, giving away two-thirds of it to India for free.

Adnoc wants to use India’s new underground storage facility which can hold around 5.33m tons of the black stuff. It’s being built as a safeguard against global price shocks, as well as price disruptions.

While this is good news for India, which is heavily reliant on imports to meet crude demand, what’s in it for the UAE?

Some analysts are concerned that the world’s onshore oil storage capacity could run out. There’s no precise figure on oil storage capacity, with very little data outside of the OECD.

Read more: Oil company forecasts aren't in line with reality

But the International Energy Agency (IEA) has said one billion barrels of the black stuff were added to storage last month.

And data released last week showed stockpiles at the US’ main delivery point, Cushing in Oklahoma, has risen to an all-time high just shy of 65m barrels.

On the other hand, other industry players think that diminishing storage space is a good thing, because it will help the market to correct itself.

"We are very bearish for the first half of the year," Dudley said at the IP conference in London last week, Bloomberg reported.

"In the second half, every tank and swimming pool in the world is going to fill and fundamentals are going to kick in. The market will start balancing in the second half of this year."

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