A pile up of tankers waiting in the North Sea suggests a glut is building again in the market where benchmark crude is traded, highlighting the task facing Opec as it seeks to rein in a global glut.
At least 10 tankers are at or near locations off the coasts of England and Scotland where they must wait to transfer their cargoes, according to vessel-tracking information compiled by Bloomberg. The increase is happening amid seasonal work at the United Kingdom’s largest oilfield.
“The physical crude market is already showing signs of weakness with floating storage threatening to build up in the North Sea, in spite of ongoing field maintenance,” according to a research note from JBC Energy. It cited the vessel pile up at the ship-to-ship transfer sites as one of the indicators of a surplus.
European refiners “have more options again now that Nigerian and Libyan loadings are rebounding” and crude and petroleum-product stocks remain high, said the JBC Energy analyst Eugene Lindell.
There are signs that oil futures respond to the day-to-day changes in the physical oil market. Brent contracts slumped more than 10 per cent from mid-July to early August after it emerged that traders had amassed a fleet of tankers that were storing barrels in the North Sea. By mid August, many of those tankers had gone and futures more than reversed their decline.
Daily exports of the crude grades that comprise the Dated Brent benchmark are set to rise to a seven-month high in November, according to loading programmes obtained by Bloomberg.
Shell offered Forties crude this week at a discount of as low as 80 cents per barrel below Dated Brent on a ship-to-ship transfer basis. That compares with the last such deal done on September 20 from Total to Shell at a 5 cents premium.
Meanwhile, the structure of contracts for difference – derivatives used in the North Sea for speculation and hedging – returned to contango, where prices in the future are higher than those at present. A forward curve in contango is an indication of an oversupplied market where prompt cargoes sell at lower prices than those for later delivery.
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