* Current markets make it profitable to store oil for future
* That is undermining OPEC-led push to force crude out of
* Many tankers sitting around Singapore storing oil
By Henning Gloystein
SINGAPORE, June 13 A 10-percent decline in oil
prices since late May could push traders to keep crude in
storage, looking to sell down the line when forward prices are
That would undermine the impact of supply cuts led by the
Organization of the Petroleum Exporting Countries (OPEC), which
partly aimed to force traders holding oil in storage to sell to
reduce bloated inventories that have sapped global prices
Brent crude futures for delivery in half a year's
time were this week around $1.50 per barrel above current
prices, a market structure known as 'contango' that makes it
profitable to store fuel instead of selling for direct use.
Shipping data shows that at least 15 supertankers are
sitting in Southeast Asia's Strait of Malacca and Singapore
Strait, filled with unsold fuel.
While that is less than in previous months, traders said
that volumes in storage could easily pick up.
"If contango lasts, it's very possible that the amount of
tankers used for storage rises back to levels seen earlier this
year," said a trader who fixes floating storage deals. He
declined to be identified as he was not authorised to speak with
Oil shipments to Asia remain high, stoking the supply glut
in the region.
Trade data shows that 21.5 million barrels per day (bpd) of
crude came to Asia on tankers in May. While that is down from a
peak in February, it is similar to levels in late 2016, before
production cuts were announced.
OPEC has so far shied away from making significant supply
cuts to its biggest customers, most of which are in Asia.
And other producers, especially from the United States, have
stepped up exports, further stoking the glut.
OPEC's de-facto leader Saudi Arabia now says it will cut
July crude allocations to Asia by 300,000 bpd, although many
Asian refiners so far say they have received all their
Going forward, analysts said that storage levels would be
key in determining the health of the oil market.
"It's the only statistical proof the market can get to
confirm or deny OPEC's claim the market is heading back toward
balance," said Greg McKenna, chief market strategist at futures
(Reporting by Henning Gloystein; Editing by Joseph Radford)