North Sea oil inventories reduce in sign of market recovery

The volume of North Sea crude, the industry’s global price benchmark, has declined sharply since mid-August according to recent floating storage data, in a welcome boost to the global oil sector.

Reserves at two supertankers in the North Sea off the cost of the UK, Desimi and Gener8 Neptune, currently contain about 4 million barrels of oil, down from 10 million just three weeks ago.

The clearing of the supply glut in these two storage tankers was shaped by increased exports to the Far East, including destinations such as China and South Korea, who have been encouraged by the current backwardation in the market.

Backwardation is a feature whereby prices for crude delivery are higher than current contracts for the commodity.

A North Sea trade source said: “The whole market is tightening up. Crude inventories have been drawn down, and there is no direct economic incentive for floating storage.”

The reduced volume of supplies in the North Sea are an encouraging sign of building momentum towards a rebalanced market.

However, a recent study found the UK’s North Sea oil sector is still losing thousands of jobs, despite the recovery in the oil price from the 2014-16 collapse.