The amount of oil stored on tankers around Singapore has dropped sharply in the last months, the latest indication that OPEC-led supply cuts are successfully tightening crude markets even as U.S. exports have soared.
Shipping data in Thomson Reuters Eikon shows around 15 super-tankers are currently filled with oil in waters off Singapore and western Malaysia, storing around 30 million barrels of crude. That is half the number of ships in June and down from 40 tankers holding surplus fuel in mid-2017.
The drop in floating storage around Asia’s main oil-trading hubs comes in the wake of voluntary production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia as they look to choke off a supply overhang that has dogged markets for years.
“There are less incentives for traders to hold crude given rising crude oil prices and premiums. So to some extent, the OPEC cuts have worked,” said Eng Hian, head of trading at Agritrade Energy in Singapore, which trades crude and oil products. The Agritrade group of companies also has a shipping arm that operates tankers used for storage.
Brent crude futures LCOc1 are up more than 40 percent since July to almost $64 per barrel. Also, the Brent forward curve <0#LCO:> shows contracts for future delivery are cheaper than spot supplies, a condition known as backwardation which makes it unattractive to store oil.
“The (backwardation) structure has flushed out oil in storage,” Eng Hian added.