Oil on water is decreasing fast. According to some sources, the offshore storage in Asia might already have halved from the peak. As it is the most expensive way to store oil and as the contango has vanished, this is normal to see this happening firstly offshore, then onshore. If Covid does not come back with a vengeance, inventories draws will reach 5 million barrels a day very soon as demand has now overshoot supply. The US demand has come back to February levels or 94-95% of a normal July peak driving season month. We anticipate World demand to be back to 94-95% of normal by December with jet fuel obviously lagging. We talked to EURONAV and DIAMOND SHIPPING last week. VLCC rates are stabilising and could reserve good surprises in Q4. The sector is now worth taking a look with the view of a normalised Tanker winter season. With oil doubling in price in a short period of time, refinery margins are under pressure and the sector had a false recovery. However, VLCC rates are stabilising and could reserve some good surprises for Q4 if, as we believe, the US become again a net importer of crude. According to Parsley ‘s CEO, Shale production saw its peak last year. Fossil fuel companies are hedging their bets. DOMINION sold its gas assets to Berkshire and is focussing on offshore wind in Virginia. It may become soon the US version of ORSTED. As the rig count continues to go down ( 220 vs 880 at the start of the year), shale production of 8 million last year should decrease by a good 3 million barrels a day in the next twelve months. A Democrat victory will make the situation worse. Under the pressure of native Indians, the court has ruled to close the North Dakota pipe line. This is bad news for the Bakken field and for Energy Transfer, the pipe line company.
The move to renewables is taking place but it is not all negative. Firstly, many oil services companies have now increased their offer for Offshore wind, offshore hydrogen units and decrarbonisation. AKER SOLUTIONS which had a positive profit warning this morning is one of them with 50% of its offer now in blue hydrogen and floating wind farms. FUGRO is busy studying foundations for wind farms and Subsea 7 taking all the underwater laying and installations of electric cables. Electric cables are laid off between the UK and Denmark requiring the same offshore expertise which is mastered by oil services companies. On top of this, offshore oil is the cheapest and has the best CO2 balance sheet. As demand of oil may only peak in 2040 but onshore non-conventional supply may already have peaked, the offshore oil suppliers should have a good decade in front of them.
