Headache for Opec as oil market structure signals return of glut | Malay Mail

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SINGAPORE, July 30 — Rising Opec and US oil supply, coupled with stalled economic and crude demand recovery, have pushed the futures market structure back to indicating a surplus, last observed during oil’s collapse in April and May amid the coronavirus pandemic. The development is a headache...

The logo of the Organisation of the Petroleum Exporting Countries sits outside its headquarters ahead of the Opec and Non-Opec meeting, Austria, December 6, 2019. — Reuters pic

The surplus market structure, when prompt prices are weaker than future prices, is also a boon for traders, as they can store crude in the hope to resell it later at a profit. Royal Dutch/Shell, Total, Eni and Norway’s Equinor have all reported bumper trading profits over the past week. “Opec’s experiment to increase production from August could backfire as we are still nowhere near out of the woods yet in terms of oil demand,” said Bjornar Tonhaugen, Rystad Energy’s Head of Oil Market Research.

Many exchange traded funds were also spreading their long positions more equally across the curve after some asset managers were badly burnt by April’s negative expiry of US front-month WTI crude futures, Lee said. Demand from top buyer China softened due to weak margins, prolonged port congestion, severe flood and limited crude import quotas, several China-focused traders have said.“US producers are bringing back wells they had previously shut... Given the disappointing demand, it raises the possibility that the market returns to building inventories,” said Warren Patterson from ING.

 

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