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Kayrros: A Small Build In Global Oil Inventories, Libyan Supply Disruptions Continue

A small build was measured in global inventories, while supply disruptions continue in Libya

  • Last week, Kayrros reported a build in global inventories, excluding the US, while EIA reported a build in US commercial crude oil inventories.
  • Brent time spreads narrowed last week, in line with the observed build in global inventories.
  • The prompt WTI-Brent spread narrowed further last week, in line with the draw in Cushing. This spread has narrowed by almost $7/b since early June. The next roll of futures will widen this spread again, as the tightness in WTI is exacerbated by the prompt contract.
  • On the crude supply side:
    • Kayrros expects the fighting in eastern Libya to further impact production and exports.
    • Kayrros forecasts crude oil production for the Lower 48 to increase in October 2018, which is higher than the latest EIA forecast.

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Build In Global Inventories
Image source: YouTube Video Screenshot

Below is a recap of publications by Kayrros for the week ending July 6:

1. Kayrros measured a global build in land crude oil inventories between June 25 and July 2.

  • MENA accounted for the most significant build. The movement was driven by a build in Kuwait and in Egypt, which offset the draws measured in Turkey, Libya, Iran, and Saudi Arabia.
  • Inventories increased as well in Asia-Pacific and LATAM, driven by Japan and Brazil respectively.
  • Inventories in Europe drew last week, with falls in Italy, Rotterdam, and France partially offsetting the global land inventory build.

2. 10-day floating inventories drew globally except in the US and West & South Africa, while 30-day inventories drew marginally on contrasting regional movements.

  • China, the Middle East Gulf, and Europe led the draw in 10-day inventories.
  • The US Gulf floating inventories increased significantly for the second consecutive week.
  • Builds in 30-day floating inventories were measured in the Middle East Gulf, China, and West & South Africa, which were offset by draws in Singapore & Strait of Malacca, Venezuela, and Europe.

3. Saint James and Wink drove the draws in the Gulf Coast and West Texas between June 24 and July 1 while inventories in Patoka built.

  • In the Gulf Coast, Saint James inventories decreased significantly.
  • Wink inventories in West Texas decreased, while a small build was measured in Wichita Falls.

4. Lower 48 crude oil production saw a monthly increase in April, as reported in the EIA Petroleum Supply Monthly released on 29 June 2018.

  • North Dakota and Texas comprised most of the increase.

5. Fighting at eastern Libyan ports has halted exports and damaged storage capacity, leading to a drop in production from major fields in the Sirte Basin.

  • Crude loading from Ras Lanuf and Es Sider has been suspended since June 14, which was followed by the announcement of force majeure at Marsa Hariga and Zuetina on July 2. With the halt in exports from Brega confirmed by port agents, all five major export terminals in eastern Libya were suspended as of July 2.
    • In Ras Lanuf, almost a million barrels of stored crude have been lost during the conflict and only four tanks remain operational, reducing total capacity at the facility.
    • As of July 2, Kayrros estimates that production is being lost due to the shutdown of fields following the closure of the export terminals. With limited storage capacity and refinery runs in the region, additional production from the Sirte Basin is set to be shut in the coming days.
  • Libyan production dropped in June, down from Kayrros measurements in May.
  • Lower production is in line with a drop in exports.
  • The Kayrros Libya Crude Oil Inventory Tracker measured a small build in June.

6. Total disruption decreased slightly on July 4.

  • Production has resumed at the Bai Hassan oil field in Iraq on July 1, as detected by Kayrros satellite monitoring.
  • In Libya, lost production remains high.
  • In Canada, Syncrude’s oil facility remains down.
  • Disruptions in Algeria remained flat last week.

Article by Kayrros

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