Just as OPEC prepares to raise its oil production output in August, due to the expiry of the current supply cut at the end of July, China is shipping oil to the international market from its surplus storage at lower prices.
China had in April embarked on a buying spree to fill up its storage, taking advantage of cheap oil prices and in the process helping oil price recovery due to perceived improved demand.
On Monday, Western Texas Intermediate (WTI) and Bent Crude fell over 1% to as low as $40.04 and $42.55 per barrel respectively. However, at the time of this report WTI is selling at $40.33 while Brent is trading at $42.90 per barrel.
Nigeria Bonny Light closed at $43.17 per barrel with OPEC basket settling at $43.22 per barrel.
One million barrels of oil have been sold so far at the Shanghai futures exchange to the international market and loaded from the east coast of China. Two South Korean refiners purchased about 500,000 barrels each of Oman crude from the depots in China, with one of the cargoes already leaving Dongjiakou port according to Bloomberg.
The exchange had a total of 39 million barrels of medium sour grades in storage as of 16 July 2020, up more than 10 times since April 20.
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In the first six months of the year, 27 million barrels of oil were delivered to China’s Shanghai International Energy Exchange (INE) depots which accounts for 57% of all deliveries since the debut in 2018 the exchange said in a statement on its official Wechat account.
Meanwhile in India, Indian Oil Corp Ltd with a refining capacity of 300,000 barrels per day, on Sunday said it will to be shut for three weeks from 25 July to 15 August 2020. “The Indian Oil refinery in Paradip will remain shut from July 25 to August 15 for maintenance,” said Sangram Keshari Mohapatra, the top bureaucrat in the district of Jagatsinghpur, where the refinery is located. He added that the last complete shutdown in the refinery was in 2018.
OPEC said preliminary May data showed that total OECD commercial oil stocks rose by 29.9 mb, (m-o-m), to 3,167 mb. This was 232 mb higher (y-o-y), and 210 mb above the latest five-year average. Crude and product stocks rose by 9.7 mb and 20.2 mb, (m-o-m), respectively.
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According to OPEC the demands for its crude in 2020 was revised up by 0.2 mb/d from the previous month to stand at 23.8 mb/d, which is around 5.6 mb/d lower than in 2019.
Whereas in 2021 the oil cartel forecasts the demand for its oil at 29.8 mb/d, which will be 6.0 mb/d higher than the 2020 level.
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