BIGGER INVENTORIES DELAY MARKET REBALANCE

摘要

The recent decision by OPEC to extend its cuts for a further nine months failed to push prices as the market expected deeper cuts. Moreover, the rising production in Libya, Nigeria and the US also suggests that the oil market may take longer than expected to rebalance. While US production has been increasing because of new-found efficiencies and a rising rig count, Libyan production is also gradually recovering. However, as oil prices hover around $50/bbl, any surge in US production is unlikely. Although the production increase elsewhere will partly counterbalance the impact of the cartel’s output cut, the overall tight supply in the market, (especially in the second half of 2017 when demand remains seasonally firm) will support prices. Higher prices will eventually trigger inventory drawdowns, which in conjunction with lower output from OPEC will hurt the global oil trade. This is a bearish sign for the tanker market, which is already struggling to cope with excess capacity.