Posted: 2 April 2020
‘Brutal environment’ keeps oil crashing
Oil prices were trading near 2002 levels in midweek amid swelling inventories and cascading supplies from leading Opec producers, which are pumping at capacity following the expiry of an output restraint pact with Russia on 1 April. Indication of the growing global glut was provided on Tuesday by American Petroleum Institute figures that showed US crude inventories rose by 10.5 million barrels last week — far exceeding forecasts of a 4 million-barrel rise.
The three-year pact between Opec and Russia fell apart on 6 March after Moscow refused to support deeper cuts during talks in Vienna, Austria on responding to the outbreak of coronavirus.
Opec, led by linchpin Saudi Arabia, responded by removing all…
‘’Riyadh will be prepared to maintain the current strategy for at least the coming six months. The government can draw from $500 billion of foreign reserves, while its sovereign wealth fund retains $320 billion in assets,” Charles Hollis, managing director of emerging markets consultancy Falanx Assynt, told Upstream. “That said, the government will be wary of the consequences of significantly dissipating cash reserves, which will leave it vulnerable to future crises, and this may ultimately force MbS to seek a compromise if the dispute is prolonged.”
Saudi Arabia has loaded several recently leased supertankers to boost its ability to increase sales, according to ship-tracking data.
Increasing supplies are already overwhelming capacity, paving the way for more stormy days ahead.
Daily consumption is expected to plummet by up to 22 million barrels in April from a year earlier, according to estimates from some of the world’s most influential energy analysts. Storage tanks are filling across the globe as refineries fall idle amid worldwide shutdowns of aviation, road transport, and manufacturing.