Oil traders see little to justify the past fortnight's slump in oil futures

International News

Whether it's in the North Sea, West Africa or the Persian Gulf, traders of millions of barrels of crude are seeing little to justify the past fortnight’s slump in oil futures.

Crude on exchanges in New York and London fell as much as 7 percent since late April despite the temporary halt of a pipeline delivering millions of barrels a month of Russian oil to Europe’s refiners. The cessation added to a long list of supply disruptions and curtailments elsewhere in the world.
“There is no true sign of weakness in the physical market,” said Olivier Jakob, managing director of consultant Petromatrix GmbH in Zug, Switzerland. “You have lower exports from Venezuela, you’ve got sanctions form Iran, Libya which is still a risk.”

While futures sold off against a backdrop of concerns about the U.S.-China trade dispute, markets for physical barrels are anchored to the supply and demand of actual cargoes of oil. And, if anything, those are strengthening.

Record Premiums


 In Europe, traders are willing to pay higher premiums to secure immediate supplies of Brent crude, a global benchmark grade. The North Sea’s main loading programs next month will be the smallest in years -- just before northern hemisphere refineries start purchasing more oil for summer processing. Traders in West Africa and the Mediterranean also report bullish markets.Likewise, Asian refiners have been paying record premiums to secure heavy crude from Iraq that should help cover them against declining flows from Iran. They also secured extra crude from Saudi Arabia for June, despite the kingdom’s leading role among oil producing nations in restricting supplies.One fly in the ointment for bulls is the U.S., where production is still expanding and stockpiles continue to swell at Cushing, the nation’s storage hub.