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Floating Oil Storage Down By A Third: OPEC Source

Oil

Floating oil storage globally declined by a third in the first quarter of the year, an unnamed source from OPEC told Reuters. The statement supports OPEC’s claims that the production cut agreed on last December with 11th non-OPEC producers has helped to relieve a glut that last year sent WTI below US$30 a barrel.

The unnamed source did not provide specific figures, and the statement comes on the heels of an official announcement from the energy ministers of Saudi Arabia and Russia that the December cut deal will be extended until the end of March 2018, which sent prices on a rally.

Yet, earlier this month, Reuters reported that there were 35 tankers with a combined capacity of 65 million barrels of crude sitting in the Straits of Malacca in Malaysia – one of the main global oil shipment routes. This, according to the report, highlighted OPEC’s failure to relive the glut.

Morgan Stanley chimed in, citing shipping and import data that showed that the global supply had not declined. On the contrary, the figures suggested maritime supply, and more specifically OPEC supply, actually went up in the first quarter of the year, by as much as 700,000 bpd.

This latest anonymous statement about falling floating oil storage is not the first one to come from OPEC. In late April, Aramco’s chief executive, Amin Nasser, said the same: that the OPEC deal had helped to bring down floating oil inventories in the first three months of 2017, again without providing any reference figures.

This lack of specific numbers may have well contributed to skepticism about the success of the OPEC-non-OPEC deal. The latest announcement about a longer than expected extension of the cuts also highlights the arguable nature of this success, even as OPEC producers have started reducing exports, as well as production.

By Irina Slav for Oilprice.com

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  • John Scior on May 15 2017 said:
    I am not sure if the OPEC and Russian production and export numbers are to be believed. Are they true or merely fictitious in attempts to talk up the price of crude ? Meanwhile , all these tankers are no longer being used as storage ( not their primary intended purpose ) but rather can be used to get crude from point A to point B. For example, lets say IRAN , who was once limited in their trade by sanctions and is now more able to transact their oil for income, will want to get their tankers going and see a return on their investment by filling and shipping more oil.
  • Kr55 on May 15 2017 said:
    The real issue with floating storage is how much storage on land there was around the world that is being dumped and set out to sea to land in it's new destination. All those stored barrels that had to be shipped are moved because the contango in oil provides no incentive to store excessively anymore. It is a huge hill to climb to clean out all the extra barrels that have built up over the last few years, many of them hidden.

    The IEA are one of the few that actually try to account for hidden barrels, and they take hell for doing it because it's hard to confirm, but when re-balancing eventually happens, they are vindicated because they can show how the storage draw down took longer than expected because of all of the hidden oil that needed to be brought to light and into the market. Same thing happened around 1999.
  • Johny5 on May 15 2017 said:
    Maybe they got mixed up and were counting LNG ships like the one in the picture?
  • GREG FOREMAN on May 16 2017 said:
    Yeah, any information provided from OPEC could be best described by the Texas adage, "someone is urinating on our boots and tells us it's raining". With respect to any information from Russia, ditto. Such is the epitome of "fake news".

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