(Bloomberg) — Koninklijke Vopak NV said geopolitics and uncertainty about the future of oil are driving demand to store petroleum, prompting the company to upgrade its annual profit outlook.
The firm has seen strong demand for oil storage in Rotterdam, the Middle East and Singapore, with customers keen to renew contracts, even extending them with longer terms, Chief Financial Officer Michiel Gilsing said in an interview.
The Rotterdam-based company raised the lower end of its full-year profit range to €930 million ($1 billion) to €950 million on Wednesday. It has already boosted its expectations for adjusted earnings before interest, taxes, depreciation and amortization twice this year.
“Geopolitical pressure is high and hardly anybody builds new oil capacity because the lifetime of oil is obviously unknown going forward,” Gilsing said on Wednesday. “The demand is increasing and the supply of tank storage is basically stable,” he said.
Tank storage is a vital part of the global oil supply chain, which has been rocked in recent years by the fallout of Russia’s ongoing war with Ukraine and conflict in the Middle East. Sanctions and attacks by Houthis in the Red Sea area have led to dramatic changes in trade flows, with repercussions for those that store and transport barrels.
Meanwhile, oil market watchers expect supply will outpace demand next year, potentially a boon for storage companies.
Vopak has allocated €1 billion toward growing its base in industrial and gas terminals by 2030, while it targets gradually lowering the share of capital toward oil and chemical. Still, almost all of the company’s oil storage capacity – including biofuels – is rented out to customers, Gilsing said.
©2024 Bloomberg L.P.