Now the price of oil is growing – in just a week, Brent quotes increased by more than 50% – from $ 20 to 31 per barrel. Experts attribute the price increase to the new OPEC + alliance deal on a serious reduction in oil production concluded in April. But how long will stock market players and fundamental investors have enough optimism?
Goldman Sachs data on a glut in the global oil market looks very impressive: 95% of the storage capacity of oil refineries in India, one of the main consumers of hydrocarbons, is used.
Similar troubling calls come from Europe: deliveries to the UK, Germany, France, Italy and Spain exceed demand by about 50 million barrels per week. Vaults of the main American oil storage in Cushing are more than 80% full. By the beginning of summer, experts believe that the storage space for hydrocarbons will be completely filled.
Is this threat real to the world as a whole and to Russia in particular? What will happen to the price of a barrel – will it again fall below zero, as in the 20th of April? Are you worried about building new storage facilities in the world? With these questions, MK turned to experts: Corresponding Member of the Russian Academy of Sciences, Head of the Department of Russian State University of Oil and Gas named after Gubkin Elena Telegin and leading analyst of the National Energy Security Fund Igor Yushkov.
– Is the threat from Golden Sachs analysts real? Video clips from Venezuela appeared on the Internet – you can see on them that oil from bunkers literally spills onto the ground. How can this be explained?
Telegin: Such shots, most likely, can be called somewhat exaggerated and designed for a biased perception of an unprofessional audience.
In April, May futures did trade at a negative price. Everyone understood that otherwise it would be impossible to sell oil. Now the situation has not changed. Almost all of the world’s oil storage facilities are full. It is possible that such a dramatic situation will continue for another one or two months, but by mid-summer demand will recover slightly, thanks to the OPEC + transaction, and the gradual restoration of demand for raw materials after the pandemic.
Yushkov: Of course, the new OPEC + deal should work. True, you should not expect an instant effect from the approved contract.
The conclusion of the agreement allowed hinting to producers and buyers of raw materials that onshore oil storage facilities and offshore tankers would soon have to deal with the supply of new volumes of raw materials. That is, storing oil has become less profitable than selling it. However, demand at one point will not increase.
It is possible that manufacturers will dump raw materials into the sea in order to maintain the available volumes for filling with fresh hydrocarbons. While there is a place for oil storage – even at the famous American Cushing there are available volumes for filling them with “black gold”. But gradually resource bases are being filled. Around July, if the parties to the OPEC + agreement fulfill their obligations, the market will return to the pre-crisis levels and the volumes of oil offered by traders will not exceed the demand for hydrocarbons.
– Is it possible to quickly create new underground oil storage facilities, including through the use of already exhausted fields that could become natural reservoirs for the content of raw materials?
Telegin: This is not the most efficient storage method. It is extremely unprofitable to first extract oil, and then pump the raw materials back into the reservoir.
You can create a large underground oil storage in less than a year. A similar project will cost several billion dollars. Just keep in mind that its service, when demand for petroleum products will increase, will be several times more expensive than the services that such a bunker can provide. Therefore, no new storage capacities are now heard in the world.
Yushkov: You have to understand: in three days and even in three months you cannot build a new oil storage. And when such a structure, requiring serious investment, is created, it will most likely be needed by no one – if the demand for oil grows, it will not be profitable to store significant volumes of raw materials. Why keep oil “in the bosom” if it can be sold with profit and not be wasted on services for its maintenance.
Even now, it is much cheaper for manufacturers to rent crowded oil bunkers or sea transport than building additional storage facilities. Such containers will save only in times of crisis. In the absence of such strokes as coronavirus, they will be idle and take away money for maintenance.
Oil storage facilities have always been located on the territory of importing countries. Large projects are going to be implemented in China. Russia, as a supplier of oil, always had only transshipment facilities capable of ensuring stable transportation, but not long-term storage of raw materials.
– Back in March, the cost of daily freight of supertankers transporting hydrocarbons to China rose to $ 250 thousand. This was influenced by Saudi Arabia’s plans to increase production and booking of ships for storing cheap oil. How much does it cost today to rent a marine supertanker that can store several hundred thousand barrels of oil?
Telegin: This is an extremely opportunistic issue. The cost of freight soared almost ten times. But even for such money it will be extremely difficult to find affordable containers for storing hydrocarbon resources. In the waters of large port cities there are several dozen supertankers who are full to the eye, who are waiting for them to be unloaded.
Yushkov: Rental of marine supertankers has, of course, grown recently. True, there is a paradox. If you rent a tanker for two months, when the cost of a barrel does not exceed $ 20, by the end of the lease term you may be at a loss. Storage of cheap oil is an extremely dubious prospect. Oil, like other hydrocarbon feedstocks, is best sold as it arrives, rather than stored “under the pillow,” like dollars or gold.
Read the material “Everything is flooded with oil: hell is created with storage facilities”