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Oil glut could worsen as OPEC+ floods market

With solely every week to go earlier than OPEC+ nations begin flooding the world’s whole oil manufacturing with an estimated additional 2.5 million barrels per day (bpd) amid the Covid-19 disaster, constructing one of many largest oil provide gluts the world has ever seen, UK operator INEOS has determined to postpone its scheduled upkeep for the North Sea Forties pipeline system (FPS) in a transfer that Rystad Energy calculates will add a number of hundred 1000’s of additional barrels to the market each day.

Indeed, the Brent Crude dropped to $28.89 yesterday, as COVID-19 pandemic hits tougher.

Based on this improvement, Rystad Energy has raised its North Sea oil manufacturing forecast by 330,000 bpd to 2.96 million bpd for June 2020 and by 190,000 bpd to three.04 million bpd for July 2020.

“This simply provides one other ripple to the rising oversupply pool of world liquids – an overhang for 2Q20 that’s already so incomprehensibly large that it’ll ultimately power shut-ins as oil costs fall under short-run marginal prices and logistical challenges come up,“ says Rystad Energy oil market analyst Milan Rudel.

E&P corporations try to maintain oil flowing in the course of the coronavirus outbreak whereas reducing again on all different actions – together with upkeep. Turnarounds enhance human-to-human contact including upkeep crews usually leads to extra individuals working on the platform and extra rotation.

“Given the present wrestle, E&Ps are understandably making an attempt to mitigate the coronavirus threat by implementing their model of social distancing,“ provides Rudel.

Although INEOS has not but formally selected a brand new date for the FPS upkeep, besides stating that it’s postponed till August 2020 on the earliest, operators see a case for delaying the turnaround to 2021. They alsi incorporate a two-month delay to mid-August 2020 in our base case.

The FPS carries oil from UK and Norwegian fields within the central North Sea to Cruden Bay in Scotland. In addition, we additionally anticipate upkeep of the Scottish Area Gas Evacuation (SAGE) pipeline to be delayed consistent with FPS upkeep, as a number of fields linked to FPS feed fuel into the SAGE system. Thus, we additionally revise our upkeep forecast for Grane (Edvard Grieg and Ivar Aasen), Alvheim, Flotta (Golden Eagle), Beryl and Gryphon crude streams accordingly.



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