Oil tanker storage up to 111.9 million barrels: Kpler SAS
On Monday, Bloomberg reported that oil tanker storage is rising, signalling that the market is nowhere near re-balanced, despite moves by OPEC to rein in the global crude oversupply.
According to Paris-based tracking company Kpler SAS, 111.9 million barrels of crude were stored on tankers earlier this month. Higher volumes of storage in the North Sea, Singapore and Iran are responsible for most of the increase.
Crude in floating storage has built at a rate of about 800,000 barrels per day (b/d) since early May and continues to rise, according to Morgan Stanley analysts. They estimate over 52 million b/d have been loaded onto tankers in June, a record since at least 2012.
Late last year, OPEC along with Russia and some other non-members agreed to cut crude supplies by 1.8 million b/d in hopes the move would boost prices. The deal was originally supposed to last until June 2017, but has been extended to March 2018.
So far, compliance among participants has been high, but as prices rose, so did US shale and African production which has undermined OPEC’s efforts.
“If anything, it shows that OPEC cuts still aren’t having enough of an impact,” Olivier Jakob, managing director of consultant Petromatrix GmbH, told Bloomberg. “The pressure is coming from the Atlantic Basin,” where there are additional supplies, he said.
Analysts believe the return of production from Libya and Nigeria “could be a reason for the build in the North Sea”, Kpler crude market analyst Jorge Antequera told Bloomberg.
A buildup in the area where Brent benchmark is prices, “even if it’s a small build, it will have a significant impact on oil prices.”
According to the Bloomberg report, Trafigura and Vitol Group have recently chartered older supertankers for as long as eight months. A research note from Pareto Securities AS says some of the vessels are expected to be used for floating storage.
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Floating storage in Singapore has risen by 23 per cent in 2017 and 32 per cent in the North Sea, according to Kpler.
Bloomberg tanker tracking shows that almost 9 million barrels of key crude grades Brent, Forties, Oseberg and Ekofisk crudes are at sea on Aframax vessels and supertankers off the UK coasts.
E.A. Gibson and exchange data compiled by Bloomberg show that storing crude at wouldn’t normally be profitable in the North Sea, the Mediterranean or Asia. David Martin, JPMorgan Chase & Co analyst says floating storage is not viable.
The glut of crude from the North Sea will not clear unless Asian customers are offered a discount.
“Anecdotal trade reports indicate that although Asian refinery buying has been muted in recent weeks, it is picking up momentum,” said Martin.
Global crude stocks are expected to decline later this year, but Morgan Stanley analysts wrote “a return to five-year average stock levels remains elusive for some time to come.”
