No balance: oil markets still oversupplied, now growth is stuttering
By Henning Gloystein
SINGAPORE/LONDON (Reuters) - Oil industry hopes that markets are about return to balance, ending a global glut that pulled down prices by over 70 percent between 2014 and early 2016, might be abruptly dashed.
Despite recent disruptions and output cuts, there is mounting evidence that plentiful supplies and brimming inventories will delay a much-quoted rebalancing of oil markets.
"The market needs to stop worrying about this balance and concentrate on the now," said Matt Stanley, a fuel broker at Freight Investor Services in Dubai.
"We rallied on the back of supply outages, wildfires and seemingly increased demand. Well, Shell have lifted force majeure at (Nigeria's) Bonny ... the wildfires are out and Canada is close to full production, and (U.S.) gasoline demand is at 15-month lows," he added.
Not just are supplies improving, now demand may be waning.
With the United States and Europe stagnating, Asia has been the main pillar of oil demand growth. But that too is now stuttering, with tanker flows into the region down for four straight months, Thomson Reuters Eikon data shows.
One indicator of a continuing glut is the shape of the forward crude oil futures curve <0#LCO:>, which has been in contango for much of this year, meaning that oil for sale at a later date is more expensive than that for immediate delivery.
This makes it attractive for traders to store oil for sale later and is seen as a key sign of oversupply. Continued...