Crude Traders Split on Whether the Glut Has Arrived

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Bloomberg this week suggested the first signs of oversupply may be emerging already, with several million barrels of Middle Eastern oil left unsold in the latest spot market cycle. Yet some analysts disagree that there is a danger of a glut—winter is coming and so is stocking up for heating season.Somewhere between 6 million barrels and 12 million barrels of crude produced in the Middle East did not find buyers in the last spot market cycle, with deliveries for November, Bloomberg reported on Thursday, citing traders. The report speculated this could be the first sign of the long-awaited glut that pretty much everyone has been predicting, because buyers from India and China were reportedly not in a rush to purchase the cargoes.The report also noted a flatter futures curve for the Abu Dhabi Murban blend, which used to be rather bullish but has softened lately, adding to signs of a possible oversupply—or perhaps just weakened demand for that particular blend of crude. And now refiners are expecting Saudi Arabia to raise its crude prices for Asia, which does not really suggest a glut but rather healthy demand for crude.Related: OPEC+: Reuters Leaks on Oil Plans AgainFurther, the backwardation for the November-December spread for crude at the end of September stood at $1 per barrel, Price Futures Group’s Phil Flynn wrote, as cited by Investing.com, noting that the development countered analyst predictions for a glut of oil emerging before the year’s end.Separately, Flynn called the current situation in oil purgatory, writing “Oil prices are locked in a purgatory-like trading range where OPEC seems to want to keep prices in this range of pain —high enough for them to make money but low enough to squeeze US shale.”“OPEC production increase rumors were quickly denied by the cartel, but one wonders about the timing of OPEC leaks that seem to keep coming at price levels that could, in theory, unleash US shale,” the analyst added.The market is not “seeing the glut and it’s not evident yet in the physical market … it’s exaggerated”, Vanda Insights’ Vandana Hari told The National. “If China continues to buy for stockpiling, and I think they will … I see it as demand growth and a bullish signal,” Hari also said. The analyst noted the seasonal uptick in fuel oil demand for the Northern hemisphere as well, as the heating season begins.Russia’s recent additional curbs on fuel exports have also countered the glut narrative. Moscow said it would extend a ban on gasoline exports until the end of the year and curb diesel exports, as previously announced by Deputy Prime Minister Alexander Novak. 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