- At least 10 vessels near U.K. ship-to-ship transfer sites
- Oversupply continues to loom as OPEC seeks to limit ouput
A pile up of tankers waiting in the North Sea suggests a glut is
building again in the market where benchmark crude is traded,
highlighting the task facing OPEC as it seeks to rein in a global glut.
At
least 10 tankers are at or near two locations off the U.K. coast where
they must wait to transfer their cargoes, according to vessel-tracking
information compiled by Bloomberg. It is rare for more than one or two
tankers to remain at the sites -- England’s Southwold and Scotland’s
Scapa Flow -- for multiple days, historical data show. The current
increase is also happening amid seasonal work at the U.K.’s largest oil
field.
"The physical crude market is already showing signs of
weakness with floating storage threatening to build up in the North Sea,
in spite of ongoing field maintenance," according to a research note
from JBC Energy GmbH. It cited the vessel pile up at the ship-to-ship
transfer sites as one of the indicators of a surplus.
The
Organization of Petroleum Exporting Countries is trying to prop up oil
prices despite signs that a worldwide supply surplus isn’t getting any
better. The group is now ironing out the details of a pact, announced last week in Algiers, that would curb output to 32.5 million to 33 million barrels a day.
The pact triggered a rally in crude prices, which in turn spurred a rush by U.S. shale producers to lock in future prices.
Libya, Nigeria Rebound
The
OPEC accord exempts Iran, which is emerging from international
sanctions, from production cuts. While precise details of the plan have
yet to be thrashed out, Nigeria has also said it won’t have to comply
and Libya
is unlikely to be asked to because its oil production is a fraction of
what it should be. The deal will be finalized at the end of next month.
European
refiners "have more options again now that Nigerian and Libyan loadings
are rebounding" and crude and petroleum-product stocks remain high, JBC
Energy analyst Eugene Lindell said in an e-mail.
There
are signs that oil futures respond to the day-to-day changes in the
physical oil market. Brent contracts slumped more than 10 percent from
mid-July to early August after it emerged that traders had amassed
a fleet of tankers that were storing barrels in the North Sea. By mid
August, many of those tankers had gone, and futures more than reversed their decline.
Daily
exports of the crude grades that comprise the Dated Brent benchmark are
set to rise to a seven-month high in November, according to loading
programs obtained by Bloomberg.
Shell offered Forties crude this
week at a discount of as low as 80 cents per barrel below Dated Brent on
a ship-to-ship transfer basis. That compares with the last such deal
done on September 20 from Total to Shell at a 5 cents premium.
Meanwhile,
the structure of contracts for difference -- derivatives used in the
North Sea for speculation and hedging -- returned to contango, where
prices in the future are higher than those at present. A forward curve
in contango is an indication of an oversupplied market where prompt
cargoes sell at lower prices than those for later delivery.
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