Tropical Storm Cristobal Moves Toward the Gulf of Mexico
June 5th, 2020
The Russian Energy Minister said yesterday that crude oil markets in July could see a shortage of 3 to 5 million bpd, according to Interfax, the Russian news agency. I think that may be a bit of a stretch. Compare the Russian outlook with these comments from the shipping industry. Ship brokers and tanker market watchers said on oversupply of crude and oil products stored in tankers at sea will take months to clear, although recovery in global energy demand has reduced the volume compared with a peak reach in May. Ship broker Clarksons said 180 vessels with over 200 million barrels of crude oil were being used for storage globally as of May 29th , down from a peak of 290 million barrels in early May. It added 170 tankers were storing 73.8 million barrels of oil products, down from 100 million barrels in early May. IHS Markit said crude floating in storage stood at over 175 million barrels at the end of May compared with over 180 million barrels in late April. International Seaways said between 50 and 70 supertankers were storing crude, each of which can carry a maximum of 2 million barrels. Separately, about 40 suexmaxes, which can carry up to 1 million barrels, had held cargo onboard for over 30 days.
Tudor, Pickering, Holt & Company this week said the recent oil price rally should reverse production curtailments by US producers this month and lead to more than 1 million bpd of US supply to return through July.
Tropical Storm Cristobal has weakened, and its current path has moved east and taken it off a path that could have hit energy locations. It will gain some strength as it goes across the Gulf of Mexico, but it is still currently forecast to make land in the US as a tropical storm. As we all know these storms can change quickly and bears watching. But it still has many energy companies getting non-essential personnel off rig in the Gulf and will shut in some rigs in the Gulf.
Brimming diesel inventories and stronger oil prices are driving down refining profits, cutting incentives to increase production even as fuel demand recovers from the decline caused by the coronavirus pandemic.
The on again off again OPEC meeting appears that it might happen tomorrow. This is a virtual meeting so it could come together quickly. Saudi Arabia and Russia have already agreed in principal to extend the cuts of 9.7 million bpd into July, but they want the cheaters, Iraq and Nigeria to adhere to their existing cut quotas. If they cannot get an agreement on this then the cuts move back to just 7.7 million bpd from July thru December.