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In a sign that the huge global oversupply may be starting to clear, commodity trading giant Vitol Group is offering to ship to Europe 4 million barrels of Nigerian crude oil that it has been stashing away in storage, Bloomberg reports, quoting five traders familiar with the move.
Vitol is reportedly offering 4 million barrels of Nigeria’s Qua Iboe grade that it has been storing in facilities in Saldanha Bay on the southwestern coast of South Africa, Bloomberg sources say. To compare, typical trades are of 1 or 2 million barrels each.
The offer for shipment of stored Qua Iboe grade comes when regular loadings of the grade are between 10 and 13 days behind schedule, traders told Bloomberg. While under normal export schedules Qua Iboe is the largest export grade from Nigeria, there were no cargoes collected in the last week of last month, according to ship-tracking data compiled by Bloomberg.
Since OPEC began its coordinated effort to reduce global oil supply to try to ease the glut and rebalance the markets, the pricing structure of the market has changed, with contango shrinking. Before that, at the height of the glut, it was profitable for traders to store oil because the shortest-term prices were cheaper than oil futures that were further forward in time.
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“With the contango structure narrowing, it is no longer economical to stockpile,” Ehsan Ul-Haq, principal consultant at KBC Advanced Technologies, told Bloomberg. “Some refiners might be willing to take large volumes of West African crude if they can get it before they end their seasonal refinery turnarounds,” Ul-Haq noted.
Oil traders have already sold more than 10 million barrels of crude stored in tankers off the coasts of Asia in what could be seen as the start of the drawdown of the huge oversupply and market tightening following OPEC’s production cut deal.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.