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Zainab Calcuttawala

Zainab Calcuttawala

Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…

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North Sea Crude Floating Storage Sees 60% Drop In Three Weeks


The total volume of North Sea crude stored in floating storage vessels has fallen since mid-August, according to shipping sources who spoke to Reuters. The decline in inventories testifies to the success of the OPEC deal in securing a rebalanced oil market, the sources added.

Over the past three weeks, two 10 million-barrel supertankers, Desimi and Gener8 Neptune, saw their cargo decline to four million barrels each, traders said. China and South Korea have increased their orders for immediate delivery of North Sea crude, the Asian nations’ preferred grade, as backwardation continues.

“The whole market is tightening up,” a trade source in the North Sea said. “Crude inventories have been drawn down, and there is no direct economic incentive for floating storage.”

The Brent benchmark, considered the most reliable indicator of the oil market’s health, is based on the value of North Sea crude.

Global floating oil storage is also shrinking. In late July, Kpler reported that the 30-day average as of July 27th had fallen to 71.2 million barrels, from some 100+ million barrels in June. The build, which had been consistent since the start of the year, had dampened any hopes that OPEC’s and Russia’s cuts will work. These latest figures, however, suggest that the market may finally be beginning to return to a more balanced state.

Over the past few weeks, oil prices have seen limited spikes due to the effects of Hurricane Harvey, which wrecked production in the Gulf of Mexico. A fifth of total U.S. production went offline in the days following the storm, which settled over Houston and surrounding cities for several days. Hurricane Irma will hit Florida over the weekend, but the impact of the historic storm on oil markets will be limited due to its trajectory cutting into Georgia and South Carolina.

By Zainab Calcuttawala for Oilprice.com

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  • Ackmed on September 08 2017 said:
    The Eagle Ford shale was effected by Harvey, depressurized wells would need to be re-fracked. However, at the current bench mark price it is not profitable. In the short term with the on-slot of hurricanes is crippling crude supplies into the Gulf region. A week or two backup in the ports of Venezuela.

    If you look at consumption in the state of Florida it is off the charts, so much in fact over 50 percent of filling stations are out of supplies, the equivalent to 2-3 major holidays usage levels.

    Meanwhile in the Middle East and Africa exports are shrinking. After a quick education economics 101 supply and demand the African countries realized the will be better off in the long run by exporting less.
  • Aquila on September 08 2017 said:
    Of course the North Sea Crude Inventory would see a draw down to compensate for the major export terminals in & around Texas had to partially or fully shut down! The refineries in the South West USA which account for about a quarter of USA refining capacity are shut down partially or totally & will take from a week to a month to restart & reach optimum output. The production of offshore fields in the Gulf are all down while onshore fields are not affected much. Crude production in offshore fields should come back online soon as offshore rigs are designed & built to withstand & recover from outages due to storms! Onshore oilfields will come online more slowly because storm & flood damage to plant must be assessed & rectified. Also access to to oil rigs for personell must be cleared from storm damage. Only then personnel can work to get the rigs running again.

    In summary, South East USA crude stockpiles will rise, refined products will drop. The opposite is the case for North Sea oil which will see steep drop in crude stockpiles while refined products stocks will rise to compensate for the disruptions caused by Hurricane Harvey! The situation will take about a month or two to return to status quo! Then the North Sea oil stocks will rise again barring unforeseen events!
  • Brandon on September 08 2017 said:
    Expect Brent to exceed $60 mid October this year.

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