Floating oil storage increases again

Petrol pump.jpgOil markets are looking increasingly uncertain as we come to year-end.
One example of this is a new survey of floating storage by oil brokers, Gibson. This found 42 ships in use, up from the 29 seen in September. Normal levels are just 5 – 7 vessels. Another is OPEC’s weaker discipline on quotas, which is now just 61% versus 89% in March.
Equally, Petromatrix note that floating stocks of oil products are also rising, with distillates storage having risen 500% in 2009 to 90mbls. And they note that floating stocks already cover all the forecast oil demand increase for 2010. As a result, refinery margins will therefore continue to be under pressure for some time.
Petromatrix also note that the floating storage represents production that has been ‘brought forward’ in advance of actual demand. They therefore warn that if/when financial markets tire of the “correlation trade” (selling the US$, buying crude), traders may look for a “quick exit“, and put oil and product prices under pressure.
The numbers to watch seem to be $1.50 : €1.0 on the $ : € exchange rate, and $80/bbl for crude oil. Currency traders seem to find it difficult to push the euro above this level, causing oil prices to also retreat.

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