As expected, the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC countries reached an agreement in 2016 to cut the production of crude oil to increase prices. This cut has ended the super contango in the oil market, and API 650 tanks are starting to be emptied to put the oil on the market.

A contango is when the current price of a commodity does not reflect its actual value. This results in the future price of the commodity being higher than the spot price. A common situation causing contango is an oversupply of the commodity in the market. Thus, investors recognize that it would be better to store the commodity and wait until the price of the commodity rises in the future. In fact, the oil market experienced a super contango because oil producers placed an extreme oversupply of oil in the global market. Based on the future price of oil being so much higher than the current price, investors placed millions of gallons in storage waiting for a large profit in the future.

According to Bloomberg, the oversupply and collapsing prices of oil has lasted for two years. The oil suppliers simply flooded the global market with available crude oil. This oversupply led to investors filling every available API 650 storage tank and even literally floating their futures in supertankers at sea. News articles and opinions abounded about running out of storage space because the oversupply continued to rise as suppliers refused to cutback supply. As wiser commentators predicted, this storage horror story did not come true.

With the OPEC deal cutting production, the price of crude is steadily rising again. Thus, the gap between the current price of the commodity and the future price is narrowing. This is motivating investors to empty the oil tankers at sea and above ground storage tanks in the U.S. at locations where it is most expensive to store the commodity. As the price of a barrel of oil continues to rise, more U.S. API 650 tanks will be drained to send the oil to refineries or export abroad.

Many reports have been made about the record levels of storage at the Cushing, Oklahoma, which is the largest and typically cheapest API 650 tank farm in the U.S. According to the Market Insider, oil investors have even started to empty these stockpiles. All of these moves to ship prior inventories have also resulted in record U.S. oil exports in February that is expected to continue through March.