Destocking is now well underway in crude oil markets. This is focused on the vast amounts of floating storage that built up in H1.
According to a Financial Times analysis, April saw 56 ships being used for storage, versus a normal level of 5 – 7 vessels.
29 ships are still in use today, with c50-60 mbbls in store. But the price incentive for this storage has disappeared, with future month prices only c$5/bbl higher than spot. As the chart shows, this ‘contango’ had reached nearly $24/bbl earlier in the year, allowing traders plenty of margin to sell forward on a risk-free basis, as floating storage costs just 50-60c/bbl.
The first stage of the destocking process caused oil prices to stabilise around $70/bbl. Now, though, there are signs that the next phase could take prices lower, as a major increase in demand seems unlikely. As Petromatrix note, September’s US auto sales are likely to be the lowest of the year, now the scrappage scheme has ended.
- Our work
- REPORTS
- The pH ReportMonthly focus on what is driving the global economy
- NewsletterWeekly spotlight on a key issue impacting the global economy
- New Normal eBookBoom, Gloom and the New Normal: How the Western Babyboomers are Changing Demand Patterns, Again
- White PaperA Roadmap for the Global Energy Sector – IEA May 2021 report synopsis
- White PaperRenewable Carbon for Chemicals and Derived Materials – Nova-Institute April 2021 report synopsis
- REPORTS
- About us