Asia/Pacific News
Analyst Calls Singapore a "Parking Lot" of Product as Oil Dips Under $40
Oil prices declining yet again on Monday – the result of a global glut that includes refined product at a time when its consumption should be intense – were accompanied by Matt Smith, director of commodity research at ClipperData, describing Singapore as a quickly expanding "parking lot" for unwanted product.
Noting that seaborne gasoline cargoes have been diverted from New York harbour because onshore facilities are full, Smith told CNBC that floating storage aboard tanker ships is at near records in Singapore: "Essentially, Singapore is this parking lot, and a lot of those crude cargoes do not have buyers."
Brent crude on Monday was down 3.1 percent at $42.19 per barrel, after earlier dropping to $41.87; West Texas Intermediary ended 3.7 percent lower at $40.06 - its lowest settlement since April 20 - after sliding to $39.86 at the noon hour.
The declines caused a predictable flurry of comment from experts: John Kilduff, founding partner of Again Capital, emphasised "a complete abandonment" of speculative long positions and that "all the theses of the bulls in this market are becoming unwound."
Kilduff's view that the market won't rebalance any time soon is supported by a Reuters survey showing that Organization of the Petroleum Exporting Countries (OPEC) production in July rose to its highest in recent history, with Saudi Arabia, Iraq, and Nigeria contributing significantly to stockpiles; meanwhile, Baker Hughes data shows that U.S. oil drillers added 44 rigs last month, the most in a month since April 2014.
For his part, Smith sees oil "going lower from here: we have this glut here in the U.S. not only in crude but for products, as well; we're actually at record inventories for the two of those."
He predicts additional trouble in the form of China reaching its crude storage limit and causing a pullback in that country's demand for crude – a scenario Kilduff has repeatedly warned of.
Still, Ed Morse, global head of commodities research for Citigroup, remains optimistic about Brent priced at $50 by the end of this year and above $65 in 2017.
He insists that a structural change is underway, and as the supply ramp up of crude ends, the structural transition is "likely to make this dip a lot more temporary than those who are shorting the market now believe it to be."
Last week Morse proved to be the lone voice of optimism amidst tumbling prices, stating that while the downward price trend is familiar and troubling, it won't result in the 12-year lows experienced last winter: "Just the supply-demand balances across commodities is significantly tighter."
