NEW YORK/LONDON/SINGAPORE After the first OPEC oil production cut in eight years took effect in January, oil traders from Houston to Singapore started emptying millions of barrels of crude from storage tanks.
Investors hailed the drawdowns as the beginning of the end of a two-year supply glut - raising hopes for steadily rising per-barrel prices.
It hasn't worked out that way.
Now, many of those same storage tanks are filling back up or draining more slowly than investors and oil firms had expected, according to global inventory estimates and more than a dozen oil traders and shipping sources who told Reuters about storage in facilities that do not make their oil volumes public.
"CLOGGED" WITH OIL
From the Malacca Straits in Asia to the ports of Northern Europe and the Gulf of Mexico, drawdowns of global inventories have slowed or even reversed.
In the Amsterdam-Rotterdam-Antwerp (ARA) region – one of the most expensive areas in Europe to store oil and the benchmark pricing point for fuel - crude is starting to flow back into storage because refiners are "clogged" with oil, an industry source handling deals in that region told Reuters.
Refined fuel inventories have also jumped suddenly, with gasoil in tanks in the ARA hub rising to an eight-month high earlier this month, according to Dutch consultancy PJK International. Gasoil includes jet fuel, diesel and heating oil.
At one of the world's largest oil storage facilities - on the shores of Saldanha Bay in South Africa - millions of barrels were sold in recent months, traders told Reuters.
But more cargoes are flowing right back into its tanks, which can hold 45 million barrels, as sellers struggle to find refiners to buy freshly loaded oil, the traders said.
In the Houston region, stored oil stocks touched record levels at the end of March, according to energy information provider Genscape.
The state of inventories appears more mixed in Asia.
In China, the world's second-largest oil consumer behind the United States, commercial crude stocks hit their lowest level in four years in March, according to the government-controlled Xinhua News Agency. But in nearby South Korea, inventories were near a record, according to the Korea National Oil Corp.
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https://www.reuters.com/article/us-glob ... SKCN18F0EO
THIS plus the following:
Goldman Warns Of "Sharp Oil Price Drop", Inventory Glut "If Backwardation Is Not Achieved"
"we now forecast that deferred prices will need to decline with 1- to 2-yr WTI forwards of $45/bbl. This leaves us expecting high total returns for being long oil, delivered through backwardation, but recommending that producers increase their hedge coverage. If backwardation is not achieved, however, we see risks that prices fall sharply next year as OPEC reverts to growing market share through volumes."
http://www.zerohedge.com/news/2017-05-2 ... t-achieved
If you pay attention, this is the picture which has been accurately described by Steve Ludlum and BW Hill.
Impressive.
PeakOil is You
Reuters: "World refiners are CLOGGED with oil"
Reuters: "World refiners are CLOGGED with oil"
by Observerbrb » Mon 22 May 2017, 15:37:43
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Re: Reuters: "World refiners are CLOGGED with oil"
by kublikhan » Mon 22 May 2017, 16:12:07
If you have been paying attention, you would know that 6 months of a mild cut are not enough to drain the abnormally high storage levels:
$this->bbcode_second_pass_quote('', 'D')ec 1, 2016 - The oil price rally sparked by an OPEC-Russia deal to cut output is likely to be short-lived, say traders in Asia, because the agreement may only draw more supplies from storage tanks and more crude shipments from the United States. And even without increased supplies from elsewhere, if the Organization of the Petroleum Exporting Countries (OPEC) and Russia do reduce production by 1.5 million barrels per day (bpd) as pledged, the cuts would not be deep enough to shrink a glut that began to build in mid-2014, traders said.
The OPEC deal "will provide some price momentum but it cannot be compared with the cut seen back in 2008," a Singapore-based trader said, referring to the last OPEC production cut at 4.2 million bpd.
Oil price rally likely short-lived as OPEC deal not enough to reduce glut$this->bbcode_second_pass_quote('', 'D')ec 1, 2016 - The oil price rally sparked by an OPEC-Russia deal to cut output is likely to be short-lived, say traders in Asia, because the agreement may only draw more supplies from storage tanks and more crude shipments from the United States. And even without increased supplies from elsewhere, if the Organization of the Petroleum Exporting Countries (OPEC) and Russia do reduce production by 1.5 million barrels per day (bpd) as pledged, the cuts would not be deep enough to shrink a glut that began to build in mid-2014, traders said.
The OPEC deal "will provide some price momentum but it cannot be compared with the cut seen back in 2008," a Singapore-based trader said, referring to the last OPEC production cut at 4.2 million bpd.
Before the cut was announced, OPEC drove up it's production levels to record highs. Then the cut merely brought levels back down to where they have been earlier. Such a mild cut was not deep enough to make a potent effect on storage levels.
$this->bbcode_second_pass_quote('', 'D')EC 07, 2016 - Oil prices slipped on Wednesday on persistent doubts whether a planned crude production cut led by Opec and Russia would be deep enough to end a supply overhang that has dogged markets for over two years.
Oil prices shot up as much as 19 per cent after the Organization of the Petroleum Exporting Countries (Opec) and Russia last week announced they would jointly cut production next year in an attempt to prop up markets. However, doubts have since emerged whether the planned cuts will be big enough to end oversupply. Since the deal was announced, both Opec and Russia have since reported record production. "The more Opec and Russia produce, the higher the starting point will be to have to cut from."
The oil barrel is half-full.
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Re: Reuters: "World refiners are CLOGGED with oil"
by Observerbrb » Mon 22 May 2017, 16:25:52
If you have been paying attention, you will know that this situation has no precedent in the oil industry, always according to experts:
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Despite the recent dip in oil prices, industry experts have been predicting a supply-gap and rising oil prices for years. This is due in large part to an oil investment drought marked by two year of consecutive decline, a statistic that has no precedent in the oil industry. This year a report by the International Energy Agency concluded that if oil investment remains stagnant over the next few years, by 2020 we will see a significant increase in the price of oil as global demand continues to climb.
The potential supply gap has far-reaching implications that we are not ready to combat. Gas and oil are still fundamental to much of the world’s infrastructure, despite a steady increase of research and utilization of renewable energy resources. While electric cars continue to show a promising future, especially in the light of ambitious new green car policy initiatives in India and China, they still account for less than 2 percent of the world’s cars. And, as the global middle class continues to grow and exercise their buying power, the demand for oil will continue to grow alongside them.
The oil industry desperately needs new sources of oil, and they need new investors and technologies to find those sources quickly. There are currently a wide variety of techniques employed to find new deposits (seismic prospecting, well logging, gravity surveying, magnetic prospecting, and geochemical prospecting, etc.) but these are all methods with significant limitations in their ability to accurately estimate the size of new oil and gas deposits.
Many companies, including oil giant BP, have begun efforts to develop of artificial intelligence programs with algorithms that will allow them to find and drill with unprecedented accuracy in the future, but the technology is not yet ready. We can only hope that it will be ready by 2020 or that the IEA is wrong in their predictions.
http://oilprice.com/Energy/Crude-Oil/To ... -2020.html
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Despite the recent dip in oil prices, industry experts have been predicting a supply-gap and rising oil prices for years. This is due in large part to an oil investment drought marked by two year of consecutive decline, a statistic that has no precedent in the oil industry. This year a report by the International Energy Agency concluded that if oil investment remains stagnant over the next few years, by 2020 we will see a significant increase in the price of oil as global demand continues to climb.
The potential supply gap has far-reaching implications that we are not ready to combat. Gas and oil are still fundamental to much of the world’s infrastructure, despite a steady increase of research and utilization of renewable energy resources. While electric cars continue to show a promising future, especially in the light of ambitious new green car policy initiatives in India and China, they still account for less than 2 percent of the world’s cars. And, as the global middle class continues to grow and exercise their buying power, the demand for oil will continue to grow alongside them.
The oil industry desperately needs new sources of oil, and they need new investors and technologies to find those sources quickly. There are currently a wide variety of techniques employed to find new deposits (seismic prospecting, well logging, gravity surveying, magnetic prospecting, and geochemical prospecting, etc.) but these are all methods with significant limitations in their ability to accurately estimate the size of new oil and gas deposits.
Many companies, including oil giant BP, have begun efforts to develop of artificial intelligence programs with algorithms that will allow them to find and drill with unprecedented accuracy in the future, but the technology is not yet ready. We can only hope that it will be ready by 2020 or that the IEA is wrong in their predictions.
http://oilprice.com/Energy/Crude-Oil/To ... -2020.html
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Re: Reuters: "World refiners are CLOGGED with oil"
by kublikhan » Mon 22 May 2017, 16:46:47
Observerbrb, thank you for proving a point I have made several times now. This oil investment retrenchment will eventually cause the oil market to tighten up. Your sources are giving a date of 2020 or so for when this will happen. Care to take a guess on what happens when the oil market tightens up?
$this->bbcode_second_pass_quote('', 'O')il markets continue to debate the vagaries of how much crude and refined products are stored in big white tanks and floating carriers. The feeling is that there is too much sloshing around. That’s why the oil price is under siege again, down 10 percent in the past three weeks.
Meanwhile, the untold story is at the front end of the supply chain. Fixating on inventories for any product is a narrow thought process. Think of it this way: There are no worries when there is plenty of food in the fridge; but unease about the future sets in when farmers stop planting their crops.
Global producers are broadly divesting of exploration activity at the same time as consumers are investing in 90 million new hydrocarbon-consuming vehicles each year. Inventories may be full for now, but nothing in the global drilling data is comforting about future oil supply meeting still-growing consumption.
Forget Inventories – Drilling Cutbacks Will Lead To Much Higher Oil Prices$this->bbcode_second_pass_quote('', 'O')il markets continue to debate the vagaries of how much crude and refined products are stored in big white tanks and floating carriers. The feeling is that there is too much sloshing around. That’s why the oil price is under siege again, down 10 percent in the past three weeks.
Meanwhile, the untold story is at the front end of the supply chain. Fixating on inventories for any product is a narrow thought process. Think of it this way: There are no worries when there is plenty of food in the fridge; but unease about the future sets in when farmers stop planting their crops.
Global producers are broadly divesting of exploration activity at the same time as consumers are investing in 90 million new hydrocarbon-consuming vehicles each year. Inventories may be full for now, but nothing in the global drilling data is comforting about future oil supply meeting still-growing consumption.
The oil barrel is half-full.
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Re: Reuters: "World refiners are CLOGGED with oil"
by Observerbrb » Mon 22 May 2017, 17:08:14
$this->bbcode_second_pass_quote('kublikhan', 'O')bserverbrb, thank you for proving a point I have made several times now. This oil investment retrenchment will eventually cause the oil market to tighten up. Your sources are giving a date of 2020 or so for when this will happen. Care to take a guess on what happens when the oil market tightens up?
This is where we certainly disagree. I don't think the market will ever tighten up, and I think that the asset bubble courtesy of the CBs will eventually burst- This development will negatively affect the economy by causing a recession and maybe something worse, oil demand won't recover from this event but the opposite. Don't you think that real estate, virtual currencies, stocks and FANG are severely inflated? This is a complete madness. We have been down this road many times, that I presume that everyone here knows how it will end.
There are signs that some bubbles are starting to crack (one of them is the automobile sector in the USA), another one is Chinese demand. You can see some signs in some luxury property as well. Commercial and Industrian loans are stagnating - Do you know what happened last time they had this behaviour?
Millennials living in their basement, low wages, household debt hitting a new historical record last week, US GDP growth only at 0.7% YoY despite the fact that Oil prices have collapsed, student debt skyrocketing and low interest rates are not causes of this Low Oil price environment, but the consequences of the depletion of the best quality reserves.
During these orwellian era it's like an anathema to talk negatively about the economy and what could happen if we continue with this absolute economic madness.
We better deal with reality and take one step back, to take two steps forward later, or something sinister is going to happen - and soon.
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