OPEC Chief Says Floating Storage Is ShrinkingBy
Crude in tankers has dropped by 40 million barrels this year
Trend coincides with re-emergence of backwardation structure
Crude oil in floating storage is declining, showing that the market is rebalancing, OPEC Secretary-General Mohammad Barkindo said.
Crude in tankers has fallen by an estimated 40 million barrels this year, according to a transcript of a speech delivered by Barkindo on Monday. The drop has been helped by the return of backwardation -- when near-term prices are higher than those in later months, indicating tighter supply.
“This trend will obviously make it unprofitable to continue to store crude,” Barkindo said.
The Organization of Petroleum Exporting Countries and its partners agreed last year to curtail production by 1.8 million barrels a day to reduce bloated global inventories and end the price rout. The group will meet next month in Vienna to decide whether to extend the supply-cut deal beyond the end of March.
Stockpiles in Organisation for Economic Co-operation and Development countries dropped to 170 million barrels above the five-year average in August from 340 million above at the start of the year, according to Barkindo. Of that 170 million-barrel surplus, 145 million were crude and 25 million were oil products.
“These strong and positive signs are evidence that the fundamentals of supply and demand are gradually but steadily returning to balance,” he said. Good compliance with production caps, “strong” demand and slower-than-expected growth in U.S. shale output have helped accelerate the rebalancing, he said.
Barkindo’s speech, delivered by video-link at the Reuters Global Commodities Summit in London, came after the secretary-general said Sunday that “extraordinary measures may have to be taken in order to restore” stability in the global oil market.