Oil in the world is increasing. Than it threatens the economy?
Since the beginning of the year, the world oil market does not feel well. due pandemic coronavirus and quarantine of the people trapped at home, resulting in sharply reduced demand for air travel and transport, respectively — and for fuel. This, in turn, has led to an oversupply of oil and the risk that the tanks will overflow. 21 April crude oil prices experienced the largest drop in history: may futures price for WTI fell below zero at the time the paper was trading below minus 40 dollars per barrel.
One of the reasons for the rapid fall in the price of WTI became the mechanism of the futures. Their peculiarity is that if the trader is unable to close the contract, he faces physical delivery of oil. The counterparty who bought the may contract have the oil to take on your ship and upload to your vault. Realizing that the prevailing logistic situation in may is unlikely to be possible, and otherwise have to pay the seller the increased rent for failure to export, buyers one and all rushed to get rid of these futures. And podtyanuvshy them speculators only added fuel to the fire.
Another reason was a shortage of storage facilities for oil. As a rule, the raw materials are delivered to the terminal Cushing, Oklahoma, which is rapidly filled with oil due falling demand. However, the problem is not just the overproduction.
At the same time to slow down the American leader has no plans. On the contrary, he said that the U.S. is “looking for opportunities” to add up to 75 million barrels of oil in the strategic petroleum reserve, and this means that the oil drama will continue to escalate.
Despite the fact that oil prices went up on the backdrop of the entry into force on may 1, the new deal OPEC+, reducing production by almost 10 million barrels a day, to expect the recovery in oil prices to levels of 40-45 dollars per barrel is not worth it. Agree with all the experts, including the head of the Russian Ministry of energy Alexander Novak. The offer still exceeds demand, and the oil market in terror, awaiting the day when stores around the world will be no place. All the storage tanks of the planet, by calculations of the chief analyst of the Paris company Kayrros Antoine Halff may contain up to 4.4 billion barrels of oil. In early April, the containers were filled to 65 percent and the fill rate on average was 10 million barrels a day.
Other experts are even more pessimistic. So, in Rystad Energy said that as of late April, the tanks of the planet was filled almost 90 percent, and the remaining volumes will only last for three weeks. According toSaint with this assessment and Director of Gunvor Group Ltd. Torbjorn tornkvist
in addition, even free volumes in the storage tanks are already booked. “The free space there is, but it’s not available,” — explains head of analytical Department, S&P Global Platts Chris Migle. According to him, physically free from 30 to 40 percent of containers.
In an attempt once to delay full filling of the storage tanks, the company put into operation additional capacity. somebody opened a long-unused storage and somebody, as the company Caliche Development Partners, and is shifted from gas condensate oil and gasoline — they plan to fill a new cave with a capacity of three million barrels near Houston.
By mid-April, the tanks in Cushing, according to Goldman Sachs, was filled to 77 percent. All commercial storage facilities in South Korea, according to sources Bloomberg, already filled. No more free volumes and Royal Vopak is the world’s largest independent company for storage of oil. Its main hubs are located in Singapore, Rotterdam (Netherlands) and Fujairah (UAE).
the main test of oil markets potential the complete filling of the storage tanks remained three four weeks, according to Goldman Sachs analysts. Will disappear as soon as the last free capacities for storage of oil, oil producers have sharply cut production in order to equalize the imbalance between supply and demand, which, according to the Bank, will be in mid-may about 18 million barrels per day. Now as a storage for oil are starting to use rail tank cars, pipelines, and unused caves. And most importantly, that the search space for oil storage vendors are not limited to land — opened a real hunt for the tankers.
the Total volume of oil, which is now kept in the holds of tankers has doubled over the past two months. He is now more than 160 million barrels. The previous record was set in 2009, but back then the sea was kept a little more than 100 million barrels. due reduction in demand and the resulting shortage of oil storage tanks on land and reduce the speed of oil products has slowed and unloading of tankers in ports around the world. Early anticipation of discharge was four to five days, and now it has reached two weeks. As a result, some terminals there is currently pandemonium, which can lead to clashes and a real environmental disaster.
So, in the United States waiting for their turn to 76 tankers, a third of whom crowded around the southern California coast. When it comes to supertankers with a capacity of not less than two million barrels each. In the Caribbean the ships waiting near the island of Curacao. In Europe, several dozen�� tankers anchored in the shallow waters ten nautical miles from Malta. In Asia, more than 60 ships have accumulated in the Singapore Strait.
But not all of these ships are used for transportation of oil — some from the very beginning sarahtales as floating storage.
Estimates the number of tankers used for other purposes, vary greatly. Reuters says 60 ships, and the Wall Street Journal believes that it is only for less than two weeks from 9 to 21 April for the storage of oil was chartered approximately 100 supertankers. Other experts believe that by mid-may as a floating storage can be used 200 ships. And one of the senior staff of the International energy Agency (IEA), who wished to remain anonymous, said that oil storage can be used up to 15 percent of capacity of all the tankers of about 320 million barrels.
Naturally, all this has led to a sharp rise in rental prices of tankers. Ship owners — for example, Frontline and Teekay Tanker — instantly jacking up the prices when they find out that tenants are expected to use them as storage. This makes the TRANS-Atlantic and TRANS-Pacific tanker transport of oil unprofitable. 6 March 2020 freight rates of tankers was about 18 thousand dollars, and now, according to Rystad, day hire of a supertanker medium size (with a hold on two million of barrels) cost 300 thousand dollars. Thus, the monthly storage of a barrel of oil on the supertanker is 4.5 dollars.
Independent oil companies were in a stalemate: for their raw materials there are no buyers for it there are no storage tanks, and the suspension of production is too costly for small manufacturers.
the willingness to do so was admitted by the leaders of several small Russian companies. The problem is that once canned well then it is very difficult to re-learn. It requires great effort and financial investments that small companies simply do not have money. So, the cessation of operation of the average oil well in Western Siberia will cost 400 thousand rubles, and return it to work — about three times more expensive.
in addition, the efficiency of further use of the reactivated wells may be lower than that before preservation. The preservation of the wells with bituminous, heavy oil and fields in the Northern latitudes with low temperatures may lead to irretrievable loss of these resources. Russia took about ten years to recover the production levels of the Soviet era, after the production in many fields that were suspended in the early 1990-ies. The repetition of such scenes��Riya nobody wants. However, burning oil is also a bad idea. Examples of fires in the oil fields of Iraq and Kuwait during military conflicts and disasters of oil platform Deepwater Horizon in the Gulf of Mexico show that to predict environmental damage from such a decision difficult.
the Rational option is also considered the closure of existing wells for several months for major repairs and the decline in drilling of new production wells. However, these solutions are more suitable for large companies. And about 130 small companies that in total up to four percent of Russian oil production, with high probability will be under the threat of bankruptcy. According to the Director of the Association “Assoneft” Elena Korzun, the oilers have never experienced such a disastrous combination of misfortune.
To eliminate the excess supply of raw materials, which led to the drop in oil prices, it will take time and the resumption of economic activity around the world. Now oil industry workers in many countries look with hope to China, where demand for oil began to recover. According to China customs, imports of oil rose in April to 10.42 million barrels per day from 9.68 million barrels a day in March. This information contributed to the growth of quotations on the reference oil grade Wednesday, may 6. Nevertheless, analysts say that to maintain the world demand for oil will require more than the recovery of the Chinese economy. The time lag between the resumption of industrial activity of China and consumer demand in continental Europe and North America may be more than quarter. So, wait for the return of oil prices to $ 40 per barrel before the end of the year is not necessary.
