Understanding Commodity Storage

Storage facilities play a crucial role in the commodities supply, transportation and consumption chain. 

Storage is a means of collecting products before distribution into downstream operations in the midstream sector.  Storage is also used by downstream operators as an additional source of supply in the case of supply disruption.

Crude Oil Storage

Crude oil is generally stored in tanks with varying designs depending on the usage. Storage tanks come in all sizes and shapes. Each tank is designed to handle pressure conditions of the liquids, prevent leakage and corrosion and manage ventilation and fumes. 

The most common tank is the vertical, cylindrical storage tank. It ranges in size from 10 to 400 feet in diameter. The storage capacity of these tanks also varies widely, from a few hundred barrels to several thousand.

Supertankers, like very large crude carriers (VLCC) and Ultra Large Crude Carriers (ULCC), are occasionally used as storage facilities. They are usually above 250,000 deadweight tonnage in size and can carry and store more than 2 million barrels.

In the early 2000s, United States crude oil storage maintained stable levels. A brief storage surge due to low prices ended in 2015, since then, crude oil storage levels have increased steadily with small fluctuations. The storage capacity utilization rate has been around 56% to 66% level during the past five years. 

Petrochemical Storage

Compared to crude oil, petrochemical storage facilities are more diverse and complex. 

Take propane as an example. For industrial use, propane is usually stored in a cylinder tank. Whereas, for retail use, the storage tanks are called bulk plants, with typically 18,000 to 30,000 gallons capacity each.

Over the past five years, the entire petrochemicals sector has maintained stable storage levels after a slight decline in February 2013.

Natural Gas Storage

Natural gas typically uses underground storage facilities including salt caverns, mines, aquifers, depleted reservoirs and hard-rock caverns. Natural gas storage plays an important role in meeting the seasonal demand. 

Most natural gas is stored in depleted reservoirs. The reservoir’s infrastructure, like a well’s, gathering system, and pipeline connections can be reused. This is more cost-efficient than an aquifer which consists of water-bearing sedimentary rock. 

The volume of natural gas used as the permanent inventory in storage is referred to as base gas. Working gas refers to the excess volume that can be extracted for operations, such as power burn and serving retail customers. Over the past few years, working gas and base gas have been increasing steadily after a long period of stability.

Electricity Storage

Not all commodities can be economically stored. For example, it is still prohibitively expensive to store electricity in an industrial-level battery plant. Thus, the volatility of electricity prices is generally higher than other commodities, since it is prone to supply and demand disruption risk.

Major price swings, as much as 600% in one day, can occur in electricity. This occurred  on May 19, 2017, due to an unexpected heat wave. 


Commodity storage plays an important role in balancing supply and demand. When supply is disrupted by unexpected events, a sufficient storage level will reduce the financial and physical impacts felt by downstream operators while allowing them to continue their operations. 

They also maintain the option to physically store commodities in a low-price environment and wait for the price to rebound to generate greater profits. 

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