The Organisation of Petroleum Exporting Countries (OPEC) says crude oil sellers continued to heavily discount their unsold crude oil cargoes for April and May delivery to find buyers, resulting in swift declines in crude differentials in all regions.
The organisation stated that crude spot prices in the Atlantic Basin were under heavy pressure due to a sharp decline in crude demand for May loadings, while crude availability continued to increase, resulting in a significant rise in floating oil storage.
It noted that growing demand for floating storage pushed freight rates firmly higher, adding downward pressure to spot prices and crude oil differentials and limited arbitrage to Asian markets.
Crude oil in the Organisations reference basket dropped for the second consecutive month in April, shedding 48 percent of its worth, crashing in price to the lowest monthly point since December 2001, as cargoes of unsold oil continued to accumulate, OPECs just released Monthly Oil Market Report for May 2020 disclosed.
“The OPEC Reference Basket dropped by $16.26, or 48.0 percent, month-on-month, to stand at $17.66/barrel, the lowest monthly point since December 2001.
“Crude oil spot prices recorded a second sharp monthly drop in April amid an ongoing rise in the oil surplus in the spot market and accumulating unsold cargoes, as refiners heavily cut runs due to plunging oil demand and rising global oil stocks, both onshore and offshore,” OPEC said in the report.
The report noted that the collapse of oil demand, refinery run cuts and rising global oil supply resulted in a large surplus in the oil market along with massive oil stock builds, both onshore and offshore.
It however, said the structure flattened in late April and early May on signs of a tender recovery in market fundamentals.