Real Oil Market Is Sinking and OPEC+ Deal Can’t Rescue It - Bloomberg:
The physical oil market, where millions of barrels of real cargoes are traded each day, needed OPEC+’s historic cuts to global crude production months ago.
On Sunday, producer nations pledged to limit output by an unprecedented 10% of global supply. While there’s skepticism the cuts will prove deep enough -- demand has plunged by far more -- a more pressing issue is one of timing: the real market, the one that underpins headline prices, has a huge glut and the output curbs won’t even begin until May. Before then, it’s pump at will so the curbs won’t really affect physical oil supply for months.
Signs of weakness abound. Key North Sea crude swaps are trading more than $6 a barrel below the headline Brent futures price of about $28 -- the biggest discount in almost a decade. The critically important Dated Brent benchmark that shapes the price of millions of barrels of crude was assessed by S&P Global Platts at $18.08 on Wednesday. At the same time, a gauge of U.S. supply is at its weakest since 2009 as the market tries to force supplies into storage.
“In the short-term, the market remains very overwhelmed with misplaced oil,” said Torbjorn Tornqvist, co-founder and chief executive officer of Gunvor Group Ltd., a top oil trader. “Prompt time spreads will continue to be very weak, along with deep discounts for physical oil.”
The physical oil market, where millions of barrels of real cargoes are traded each day, needed OPEC+’s historic cuts to global crude production months ago.
On Sunday, producer nations pledged to limit output by an unprecedented 10% of global supply. While there’s skepticism the cuts will prove deep enough -- demand has plunged by far more -- a more pressing issue is one of timing: the real market, the one that underpins headline prices, has a huge glut and the output curbs won’t even begin until May. Before then, it’s pump at will so the curbs won’t really affect physical oil supply for months.
Signs of weakness abound. Key North Sea crude swaps are trading more than $6 a barrel below the headline Brent futures price of about $28 -- the biggest discount in almost a decade. The critically important Dated Brent benchmark that shapes the price of millions of barrels of crude was assessed by S&P Global Platts at $18.08 on Wednesday. At the same time, a gauge of U.S. supply is at its weakest since 2009 as the market tries to force supplies into storage.
“In the short-term, the market remains very overwhelmed with misplaced oil,” said Torbjorn Tornqvist, co-founder and chief executive officer of Gunvor Group Ltd., a top oil trader. “Prompt time spreads will continue to be very weak, along with deep discounts for physical oil.”
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