LONDON: An overhang of homeless crude in the Atlantic Basin has halved in recent weeks, suggesting oil traders are bracing for a further supply loss from Iran due to US sanctions and a new rally in prices. Iran’s oil exports are already dropping fast as refiners scurry to find alternatives ahead of a reimposition of US sanctions in early November, which in turn has helped drain a glut of unsold oil.
The millions of unsold barrels of crude that had pooled around northwest Europe, the Mediterranean and West Africa over July and August are rapidly draining.
A months-long surplus in the West African market that depressed prices to their lowest in months has almost vanished. Traders had said just one week ago that leftover crude from the August and September loading schedules amounted to some 30 cargoes, equivalent to an average 930,000 barrels per day (bpd).
“The overall situation ... is that US sanctions toward Iran are now increasingly kicking in, which will help to dry up the physical crude oil market and place it back into solid backwardation,” SEB head of commodities Bjarne Schieldrop said in a note this week. “This will shift the front end Brent crude oil price into the higher $70s range with a touch of $80s.” — Reuters
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