What happened to the quantities of oil that accumulated during the Corona pandemic?

The unprecedented oil glut in the market during the Coronavirus pandemic is nearing its end, but the price recovery that saves producers is bothering consumers.

According to the International Energy Agency, barely a fifth of the surplus flowed into storage facilities in advanced economies when oil demand collapsed last year until February, and since then, the rest has dwindled amid declining supply.

Writers Grant Smith and Julia Lee said, in a report published by the US site "Bloomberg", that the supply and demand for oil is in a state of equilibrium at a time when OPEC and its allies are still pursuing a policy of curbing production, with the recovery of global demand for fuel. International crude oil prices, at around $ 67 a barrel, is a boon for producers but a source of growing concern for motorists and governments that fear price inflation.

Ed Morse, head of commodity research at Citigroup, said that commercial oil stocks through the Organization for Economic Cooperation and Development have returned to the average recorded in 5 years, and the remainder of the surplus is almost entirely concentrated in China, which is building permanent reserves. Of petroleum.

The two writers explained that the accumulated quantities of oil have not completely run out, and it seems that there is a large surplus still existing off the coast of Shandong Province of China, which may be accumulated in order to feed the new refineries, according to IHS Markit Consulting Ltd.

It may take some time to get rid of what remains of the global surplus, as the OPEC Plus alliance works to revive some of the stalled supplies, meanwhile the outbreak of new strains of the Corona virus in India and Brazil could threaten a decline in demand, however, the end of the glut appears imminent.

According to estimates by the International Energy Agency, oil inventories in advanced economies were 57 million barrels more than the average between 2015 and 2019 as of February, compared to 249 million recorded in July.

These data reflect a remarkable shift from the situation a year ago, when the shutdowns caused global demand for fuel to drop by 20% and the Gunvor Group Ltd. warned of running out of storage space for oil.

The United States practically exhausted the accumulated stock, as total crude inventories fell in late February to 1.28 billion barrels (Reuters)

Falling stocks

The United States practically exhausted the accumulated inventory, as total crude oil inventories decreased in late February to 1.28 billion barrels, a level recorded before the spread of the Corona virus, and is still close to these figures, according to the Energy Information Administration.

Last week, stocks fell on the east coast to their lowest levels in at least 30 years.

According to Mercedes McKay, a senior analyst at FGE, a consultancy, "We are starting to see a revival of refinery operations in the United States, which will be beneficial for reducing potential crude stocks."

There has also been a decrease in the country's strategic petroleum reserves, which are salt caves used to store oil for use in emergencies, and Trump has allowed traders and oil companies to temporarily keep excess supply, and in recent months they have removed about 21 million barrels from the site, according to people familiar with the matter.

The surplus of oil accumulated in the seas of the world is diminishing. Tankers were converted into temporary floating depots when the onshore storage facilities were filled last year. However, this amount is declining. According to IHS Market Ltd., the surplus has decreased by 27% for the two weeks. The last two to 50.7 million barrels, the lowest level in a year, according to estimates by Yan Ling and Photius Katsolas, company analysts.

Another important indicator is the depletion of crude storage tanks at the Saldanha Bay hub, which is logistically important on the west coast of South Africa.

It is a popular location for traders that gives them the flexibility to quickly send cargoes to various markets, and stocks at the terminal are expected to drop to 24.5 million barrels, the lowest level in a year, according to ship data that Bloomberg tracks.

As for the OPEC Plus alliance - which includes 23 countries led by Saudi Arabia and Russia - the decline in stocks is evidence of the success of the bold strategy they adopted a year ago, as the alliance reduced production by 10 million barrels per day last April, which is nearly 10% of global supplies. It is now gradually returning to production compensation.

The Organization of the Petroleum Exporting Countries announced that its main goal is to return inflated stocks to their pre-epidemic levels, but it is unclear whether the organization will allow a return to normal production once this goal is achieved.

In the past, high prices encouraged the group to continue to pursue a policy of limited production even after the desired goal was reached.

Mixed blessing

For consumer nations, throwing off stock is not a blessing, and American Automobile Association data has shown that California drivers are wary of paying close to $ 4 for a gallon of gasoline.

India, a major importer of oil, has complained about the financial problems that could result from a return to the rise in prices.

In all circumstances and circumstances, the supply and demand balancing process must continue, and with the increase in demand further, global inventories will decrease by 2.2 million barrels per day in the second half of the year, which will push Brent crude to $ 74 a barrel or even higher, according to City's expectations. sunset".