A Year Into OPEC's Production Cuts, Asia's Oil Markets Have Tightened
SINGAPORE, Feb 15 (Reuters) - Just over a year into production cuts lead by OPEC and Russia, oil markets in Asia have tightened noticeably as significant amounts of excess crude have been taken off tankers used for storage and delivered to customers across the region.
Shipping data shows about 15 super-tankers are currently filled with oil floating off the coasts of Singapore and surrounding Malaysia, Asia's main trading and storage hub for crude coming from the Middle East to Asia.
That's slightly less than last November, and half the number of tankers used for storage in mid-2017.
Traders say onshore tanks in the region, including at Vopak's site in Johor, Malaysia, are also not booked out any more, marking a turnaround from 2016/17 when a situation known as tank-top was feared in which oil markets are so bloated that they run out of storage.
The fall in storage is a sign production restraint started by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia in January 2017 is having the intended effect of reducing a global glut.
The main impact of OPEC withholding supplies has been to change the structure of the oil price curve.
During oversupply, crude prices for immediate delivery tend to be lower than those for later dispatch, a market structure known as contango that gives traders an incentive to store oil for later sale.
With markets now tighter, spot prices are more expensive than those for later delivery, removing the incentive.
"Most of the contango stocks afloat are sold," said Oystein Berentsen, director for crude trading at Strong Petroleum in Singapore.
The oil price curve shows spot prices to be almost $4 per barrel above those for delivery this time next year.
"Floating storage is no longer economical," Berentsen said.
What's more, shipping data shows the majority of tankers storing oil around Singapore are only part full. In 2016/17, by contrast, the armada of tankers was filled to the rims.
Where From Here?
The main factors that could flip oil markets back into oversupply are an end to OPEC's and Russia's production restraint and soaring U.S. output.
But Saudi Arabia, OPEC's de-facto leader, says it is committed to withholding production.
12
View Full Article
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Weatherford CEO's Rebound Plan Relies On Getting Smaller
- Iran Says Oil Market Is Too Tight For US Zero Exports Target
- China's Squeezed 'Teapots' Eye Petchem Path To Riches
- Baker Hughes: US Drillers Add Oil Rigs For Second Week In Three
- Venezuela Hands China More Oil Presence, But No Mention Of New Funds
- Falcon Oil Declares Commercial Flow Test Results for Shenandoah Well
- Macquarie Strategists Expect Brent Oil Price to Grind Higher
- Japan Failing to Meet Corporate Demand for Clean Power: Amazon
- UK Oil Regulator Publishes New Emissions Reduction Plan
- Pennsylvania County Joins List of Local Govts Suing Big Oil over Climate
- PetroChina Posts Higher Annual Profit on Higher Production
- US, SKorea Launch Task Force to Stop Illicit Refined Oil Flows into NKorea
- McDermott Settles Reficar Dispute
- Russian Navy Enters Warship-Crowded Red Sea Amid Houthi Attacks
- USA Commercial Crude Oil Inventories Increase
- New China Climate Chief Says Fossil Fuels Must Keep a Role
- Oil Demand Outpaces Expectations, Testing Calculus on Peak Crude
- House Passes Protecting American Energy Production Act
- TotalEnergies Restarts Production in Denmark's Biggest Gas Field
- USA Oil and Gas Job Figures Jump
- Republican Lawmakers Say IEA Has Abandoned Energy Security Mission
- Blockchain Demands Attention in Oil and Gas
- Houthis Warn Saudi Arabia of Retaliation If It Backs USA Attacks
- Macquarie Sees USA Oil Production Exiting 2024 at 14MM Barrels Per Day
- Summer Pump Prices Set to Hit $4 a Gallon Just as Americans Hit the Road
- Chinese Mega Company Makes Major Oilfield Discovery
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Another Major Oilfield Discovery
- New China Climate Chief Says Fossil Fuels Must Keep a Role
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Vessel Sinks in Red Sea After Missile Strike
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension
- Equinor Makes Discovery in North Sea