| LONDON, April 11
LONDON, April 11 OPEC appears to be slowly
winning the battle against a global overhang of crude and oil
products as inventories in onshore and floating storage decline.
The price of oil may not reflect this just yet, as Brent
crude futures are struggling to recover its losses for
the year to date and break above $55 a barrel.
But there is no doubt that stocks are falling around the
world, from Saldanha Bay in South Africa, to the Caribbean. A
persistent glut of Nigerian oil is easing and even Iran has
liquidated the amount of crude held in floating storage.
The Organization of the Petroleum Exporting Countries
explicitly said a joint deal with non-OPEC producers to cut some
1.8 million bpd in the first half of 2017 was aimed at slashing
an excess of around 300 million barrels of crude and petroleum
products in OECD stocks.
"Across the first quarter of the year, crude stocks built by
much less than they did in the first quarter of last year even
though refinery maintenance globally was much heavier," Energy
Aspects analyst Richard Mallinson said.
Iran has sold all the oil it had stored for years at sea and
Tehran is now struggling to keep exports growing as it grapples
with production constraints.
Trading giant Vitol has sold millions of barrels of Nigerian
crude oil from storage in South Africa's Saldanha Bay, according
to oil traders, with cargoes sailing for Taiwan, India, the
United States and Europe.
France's Total has offered a further 2 million
barrels of Nigerian Escravos oil from its own Saldanha Bay
storage tanks, while sources said trader Mercuria had also been
offering oil from storage.
At the same time, Nigeria's new loading programmes are
finding buyers at a reasonable pace – in stark contrast to the
past two years, when any sales from storage put immense downward
pressure on prices for newly loaded cargoes.
Nordic bank SEB said global oil inventories in weekly data
have dropped by 42 million barrels in the last four weeks.
"Rising U.S. crude oil stocks have created some confusion so
far this year, but they are a function of reduced U.S. refining
activity on the one hand and U.S. crude oil imports on the
other," SEB said.
Mallinson said OPEC ministers meeting in late May will not
have a full picture of world stocks due to a lag in reporting
from major agencies including the International Energy Agency.
"It is going to take some time of all of the pieces of that
inventory picture to become clearer."
Stocks of oil products are also steadily drawing down.
According to consultants FGE, total main product stocks
levels in the United States, Amsterdam-Rotterdam-Antwerp
independent storage and Singapore and Japan have declined by 6.5
million barrels, in the week to March 13 (latest full data
available) to 631 million barrels.
The weekly data hit an all-time high of just over 679
million barrels in February 2016, FGE said. If the declines
continue, FGE said global product stocks could hit the top of
the 10-year range, or 611 million barrels, in just three weeks.
Still, they cautioned that much of the product strength was
seasonal, and related to maintenance shutdowns that also
diminished consumption of crude oil.
This bullishness towards oil products has seen huge amounts
of gasoline leaving Europe, and has hindered diesel shipments
into the region, which has boosted margins and encouraged
refineries to run as quickly as they can.
Still, Hamza Khan, head of commodities strategy with Dutch
bank ING, said normal seasonal draws on oil products, at the
tail end of refinery maintenance season, could be creating a
mirage of a tight market.
"Is this due to the reasonable cuts? Or is it due to
seasonal draws on crude?" Khan said, adding that with Asian
refineries in their month of heavy maintenance, cleared cargoes
from storage may not have been processed yet.
"The key question is whether it's being consumed or whether
it's pushed into somewhere else," he said.
In the United States "refineries are already running at 91
percent of capacity, how much more crude can they burn?"
(Editing by David Evans)