The kingdom says it is leading by example in advance of OPEC's November summit to discuss cutback extensions. File Image / Pixabay
To what extent it impacts the global market is unclear, but supply volumes on tankers in the Strait of Malacca in September dropped to the lowest level since August of 2016, from about 30 million barrels in May to 8.1 million last month, according to data from cargo-tracking firm Kpler.
Bloomberg reports that some traders are giving up on vessels they chartered for storing oil, because profits from future sales no longer justify the cost of the charters (however, other traders are said to be finding ways to profit by offering tailor-made sea cargoes).
The news correlates with a speech delivered on Monday by Mohammad Barkindo, secretary-general for the Organization of the Petroleum Exporting Countries (OPEC), who stated that crude in tankers has fallen by about 40 million barrels in 2017 thanks to the return of backwardation, where near term prices are higher than those in later months.
Mohammad Barkindo, secretary-general, OPEC
This trend will obviously make it unprofitable to continue to store crude
He added, "This trend will obviously make it unprofitable to continue to store crude."
To decline also falls in line with stockpiles in Organization for Economic Co-operation and Development countries dropping from 340 million barrels above the five year average at the beginning of 2017 to 170 million in August, according to OPEC data.
But despite these figures and widespread indications of increased demand, some OPEC members seem to be playing it safe by holding true to the spirit of the cartel's crude cutback initiative: Saudi Arabia's energy ministry said its state-run Saudi Arabian Oil Co. (Aramco) will make "the deepest customer allocation cuts in its history" of 560,000 barrels per day (bpd) for oil supplies in November, top help further reduce global inventories.
The decrease is a full 290,000 bpd reduction over and above the 486,000 bpd reduction the Saudis pledged to cut under its commitment to OPEC's initiative.
The ministry stated, "Saudi Arabia is once again demonstrating extraordinary leadership in its commitment to re-balancing the market, as we approach the upcoming key meeting of November 30 in Vienna, by restraining not only the top-line of production volume, but even more importantly the bottom line of exports, which are what ultimately shape global inventories and market balances.
"The kingdom expects all other participants in the effort to follow suit and to maintain the high levels of overall conformity achieved in August going forward."
The Aramco disclosure comes on the heels of the Saudis making overt - and apparently successful - attempts to patch what was widely perceived to be a growing rift between the kingdom and Russia: last week King Salmon paid an unprecedented visit to the former Soviet Union, vowed to continue working with the country to stabilize the world oil market, and reportedly facilitated joint venture deals worth over $3 billion.