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Friday, September 21, 2018

Oil supply ups and downs

Even with oil prices hovering around USD 60 per barrel it appears that oil producers are struggling to increase production - OPEC only increased oil production by 0.1 mbd in September to 29.79 mbd.  

Outside OPEC, whereas the Former Soviet Union’s net crude oil exports fell marginally to 8.94 mbd in August, the FSU is still expected to increase production by 0.4 mbd over 2005 as a whole, according to the latest figures from the International Energy Agency (IEA). But European production is expected to decline by as much as 0.4 mbd to 5.7 mbd this year. One of the biggest increases in oil supply is expected to come from non-OPEC Africa where oil production is expected to increase by 0.4 mbd to 4.8 mbd in 2005, before dropping back to 4.3 mbd in 2006. 

This is good news for China, which is dependent on sweet West African crude oils. China can to a small extent handle sour crude oils, but, according to Jason Feer, Vice President and Singapore Bureau Chief of Argus Media, the Chinese ability to handle sour crude will not improve over the next few years. 

Overall global demand for oil is being downgraded by IEA forecasts and will increase by only 1.3 mbd this year compared to 2.9 mbd in 2004 – a year when there was significant stockbuilding.

 With the fleet forecast to increase by more than 6%, there could be an easing of the tanker market. Although all segments are enjoying good freight rates at the moment (in particular aframaxes and product tankers) rates are well down from peak levels.

 Unless figures for the oil market have become distorted, the disruptions caused by the hurricane-damaged oil installations have also had an effect on the tanker market as well as putting stress on market sentiment. Some tankers have been reported used and chartered for storage. 

The number of VLCCs fixed from AG stands, according to broker/analyst Marinav, at an average of 104 per month until October compared to 105 for the same period last year.  

Contact: Erik Ranheim