It's always tough to know if OPEC crude reductions are having an impact.
Certainly, looking at yet another fall in the price of crude today, it's hard to argue that it's occuring. Not only did light sweet crude for March delivery on the NYMEX decline $4.15/b, to $41.88, the March-April spread widened by more than 55 cts, a sign that inventories keep finding nooks and crannies at the Cushing, Oklahoma delivery point to be stored. Spreads in the Brent market also widened.
But the physical markets told a slightly more bullish story. Nigerian grades strengthened against Brent, and traders were citing OPEC cuts as a reason. Platts' Daniel Colover in London reported Tuesday that Bonny Light/Qua Ibo barrels, a key grade ouf ot Nigeria, were assessed at Dated Brent plus $2.725/b, up $1.05 since January 5,
a significant increase in a short period of time. It's also the highest it's been since early November.
Traders also cited tighter Algerian barrels as a reason for the increase. Last week, Platts reported that Algeria's Saharan Blend crude had risen from Dated Brent plus 47.5 cts/b on January 9 to plus 87.5 cts/b, according to Platts assessments.
Of course, what OPEC should keep in mind is that the crude that they are putting into the market, at least some of it, continues to go into floating storage. Traders reported that some of those OPEC grades were being stored to take advantage of the contango. And at the same time, some oil is coming out of floating storage. Platts' Joel Hanley reported earlier this week that Shell had unloaded some of its floating storage in the UK North Sea market, pushing down the price of North Sea Forties crude. However, that seems to be an aberration; the market is not reporting that sort of activity to be widespread.
But despite that, the slope of the forward curve continues to guarantee that oil will flow into storage if it's there, and that creates a problem for OPEC down the road. How are they going to find buyers in three months if a lot of their buyers already have their barrels, sitting in a tank in Cushing, Oklahoma?
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