Now, there are signs three years of oversupply are coming to an end.

Brent has flipped into backwardation, meaning prices for immediate delivery are higher than contracts for future shipment. That is a sign traders believe the market is tightening. It also helps to empty stockpiles by encouraging traders to sell oil immediately, instead of storing it to take advantage of higher prices in the future.

Brent crude price curve, source: Factset

Crude stockpiles have fallen in the OECD, a group of mostly developed nations, throughout the second quarter, OPEC notes in its September bulletin. OECD inventories stood at 195 million barrels above the five-year average in July, down from about 340 million barrels above that level at the start of 2017.

OPEC highlights the role of its production cuts in driving down stocks in the bulletin. The group, along with other exporters, is keeping 1.8 million barrels off the market through March. Friday’s producer meeting ended without the group agreeing to extend the cuts, Reuters reported.

“Over the first half of the year, the collective efforts of participating producer nations have pulled close to 350 [million barrels] in aggregate from global supply,” OPEC said. “It is easy to imagine what the market would have looked like had these 24 countries not taken such collective action.”

But OPEC may be giving itself too much credit, according to Matt Smith, director of commodity research at tanker-tracking firm ClipperData. While the cartel and its allies continue to keep a lid on production, their crude exports remain robust, with the exception of Saudi Arabia, he said.

Given that constant, the variable that matters for oil prices is demand, Smith said.

U.S. crude prices, year to date, source: Factset

“We haven’t really seen a number of OPEC [members] dialing back on their exports. For this momentum to be upset, it would have to come from the demand side,” he said.

U.S. refineries are processing about a million barrels a day less oil than at this time last year due to impacts from Harvey. However, crack spreads — the difference between crude oil and refined product prices — remain wide. That gives refiners a reason to keep processing crude at a time when they’re normally winding down operations to perform maintenance on their facilities.

Refiners may put off some maintenance and keep plants running so they can continue to take advantage of fat profit margins, sustaining demand for feedstock crude oil, analysts said.

“There are times like these when they’ll push the envelope, especially when the envelope is getting stuffed with cash,” said John Kilduff, founding partner at energy hedge fund Again Capital.

Demand for refined petroleum products like diesel has been “remarkable,” but Kilduff believes persistently high U.S oil production will continue to exert downward pressure on crude prices. He is also wary of the prevailing narrative around demand strength.

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