Eric Watkins
OGJ Oil Diplomacy Editor
LOS ANGELES, Mar. 20 -- Seaborne oil exports of the Organization of Petroleum Exporting Countries, excluding Angola and Ecuador, will fall to the lowest level since September 2003 in the 4 weeks to Apr. 4, said shipping analyst Oil Movements.
Exports from the group will average 22.41 million b/d, down 770,000 b/d from 23.18 million b/d in the 4 weeks to Mar. 7, OM said in its latest weekly estimate dated Mar. 19.
"Latest estimates are probing into the second quarter and show the rate of decline in OPEC sailings gathering speed," OM said, adding: "Latest estimates put the inferred rate of compliance (with production targets) in the 70-75% range."
But even the current "consensus" estimate of compliance (circa 80%) was not enough to make a convincing case for more "cuts" when OPEC ministers met last week. The December round of cuts, however, are still working through the system, and a seasonal tipping point is coming up.
According to latest supply-demand estimates from the International Energy Agency, the global balance slipped into the red in this quarter.
"This is the normal seasonal pattern for the winter quarter, but earlier estimates had implied a much smaller draw, or even a small build," the analyst said.
In the event OPEC cuts are big enough to ensure an accounting stock draw, OM said, it remains to be seen "how an accounting deficit will translate into observable stock changes."
Onshore crude stocks have stayed high on the available evidence, and any decline in offshore transit stocks will also be on the low side (100,000 b/d), given sharp declines in long-haul sailings through the period.
"The contribution from changes in offshore floating storage is the big unknown in the picture," OM said.
An ongoing sell-off through this month could add 100,000-200,000 b/d to the offshore stock draw, and make the change in stocks at sea into a major contributor.
It would also add to the count of onshore crude stocks, at least temporarily.
Declines in product stocks and draws in crude oil in transit-offshore storage look set to make the biggest contribution on the debit side, with limited movement in onshore crude.
Demand decline has been the main driver through the first quarter, but in the next 3 months—with further movement towards compliance with December targets—the initiative will switch over to the supply side of the account.
Unless recession-driven decline in consumption is more serious than currently forecast, a counter-seasonal global stock draw should surface in the spring and continue through the summer.
"Given the reemergence of excess capacity in the supply system—upstream and downstream—this will not hand the keys over to OPEC, but the floor under prices should be more secure," OM said.
Oil-in-transit is 45 million bbl lower than this time last year, and is reaching levels that have been approached recently only at seasonal low points—in the summer, rather near to peak winter.
From the peak level just before the December cuts were agreed upon, up to a low earlier this month, OPEC oil-in-transit declined by around 500,000 b/d (the only major draw on crude stocks through the winter).
"Temporarily that runoff has stopped—to the relief of a pressured tanker market," OM said, adding that, "over the latest 4 weeks, transit stocks have started to rebuild again, in a modest way."
Contact Eric Watkins at [email protected].
