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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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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…