US, WASHINGTON (ORDO NEWS) — About 50 million barrels of oil from Saudi Arabia are approaching the shores of the United States, as the Energy Information Administration reported a decrease in reserves for the first time in several months. According to Bloomberg, this could reverse the recovery in oil prices.
On Wednesday, the EIA reported that commercial oil reserves fell by about 700 thousand barrels for the week ending May 8. It was hoped that the problem of oil storage could be resolved even if total reserves exceed five-year average reserves for the season.
According to data from Bloomberg, by the end of June, more than 50 million barrels of Saudi oil should arrive on the Gulf of Mexico and the West Coast. If during this period production in the USA does not decrease, demand will increase both domestically and abroad, it will be necessary to store these barrels, which again will lead to an increase in total reserves. And it will put pressure on prices.
“The current contango, which NYMEX futures show on WTI, clearly indicates a possible recovery in the second half of the year. Now virtually no one has an incentive to expand production, so the oversupply will gradually increase,” said analyst Michael Stark.
Nevertheless, the second half of the year is still far away; the immediate prospects are rather gloomy. An additional 50 million barrels of oil will have a strong negative effect on prices.
“If you unload all of the Saudi tankers, the oil they transport compensates for all production cuts compared to March levels during May, maintaining high fill rates,” said Paola Rodriguez-Masiu, senior analyst at Rystad Energy, the oil market.
The tankers were loaded before OPEC + entered into an agreement to reduce production by 9.7 million barrels per day in May and June. Saudi Arabia launched an aggressive price war for market share when the previous OPEC + deal failed in early March. Now, amid weak demand, they have several options: unloading or turning into a floating storage facility for an additional fee.
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