- Glut Expected as 117 Tankers Head to China
- Experts Hail Swift OPEC+ Oil Cut Deal
For Nigeria, a country whose economy is about 97% dependent on external earnings from crude oil, worrying times are here again as American multinational investment bank and financial services company, Goldman Sachs has projected that improving global oil demand and faster-than-expected production curtailments from outside the OPEC+ pact are set to push the oil market into a deficit next month.
The company also projected a little room for oil price rally in the near term because of what it called the still sizeable oversupply of crude oil and refined products.
“We believe that the next stage of the oil market rebalancing will be one of the range-bound spot prices with the most notable shifts being a decline in implied volatility as well as a continued flattening of the forward curve without long-dated prices rising yet,” Goldman Sachs stated in its note.
The Wall Street bank kept its forecasts for oil prices for the summer, with Brent Crude seen at $30 a barrel, and WTI Crude at $28 per barrel, due to the still uncertain pace of global demand recovery.
Agency reports show that last Thursday, Brent Crude was up 2.8 percent at $30.01 and WTI Crude was trading up 3.04 percent at $26.08, after the EIA reported on Wednesday a surprise crude oil inventory decline of 700,000 barrels for the week to May 8. In gasoline, the EIA reported an inventory draw of 3.5 million barrels, after a draw of 3.2 million for the previous week, which fueled hopes for demand recovery. Gasoline production last week averaged 7.5 million BPD, versus 6.7 million BPD a week earlier.
“US crude oil inventories declined by a modest 745Mbbls over the week, while stocks at Cushing, the WTI delivery hub, fell by a little over 3MMbbls, which is the biggest weekly drawdown at Cushing so far this year,” ING strategists Warren Patterson and Wenyu Yao said last Thursday while commenting on the U.S. inventory report.
In a related development, oil experts expect that there are some dynamics that could lead to a glut. This has to do with a total of 117 very large crude carriers (VLCCs) – each capable of shipping 2 million barrels of oil – traveling to China for unloading at its ports between the middle of May and the middle of August. If those supertankers transport standard-size crude oil cargoes, it could mean that China expects at least 230 million barrels of oil over the next three months, according to Bloomberg. The fleet en route to China could be the largest number of supertankers traveling to the world’s top oil importer at one time.
In the meantime, the decision by OPEC+ to a trimming down to 9.7 million barrels of daily crude output — roughly 10% of global supplies has been hailed by member countries.
“We’re starting to see some discipline come into the producing countries’ programs. The headline figures from the first 10 days of the month do look like they’re starting to crack down” , Clay Seigle, Managing Director at Vortexa was quoted as saying.
Also, OPEC Secretary-General Mohammad Barkindo has expressed his excitement at the level of compliance .“All participating countries are rapidly ramping up their level of compliance. So far, so good,” he said.
