1. According to Bloomberg oil demand in China to drop 3mbpd. That is 90 1mb cargoes or 45 VLCCs a month the Chinese have to cancel or re-sell to balance their supply/demand.
#OOTT
#OOTT
2. What have we seen so far from China. 5mb of crude up for resale or 166kbpd over a month. And that is crude that won’t be processed until May or even June.
3. Cargoes arriving now in Chinese ports have been on the water for 4-6 weeks. They were loaded before the Coronavirus panic even had started. They were bought even earlier than that in October. Ship tracking now won’t tell you anything about crude demand.
4. Chinese crude imports always fall at this time of year because of the Lunar New Year holiday. But even if the ports have been closed by the Coronavirus, the boats will just be delayed in their discharge. They will sit outside.
5. China bought these cargoes when crude price was much higher. Price paid is determined usually by the average of the pricing a few days after the Bill of Lading. For them to sell any cargoes on the water now would certainly be a huge loss of money.
6. Therefore, we won’t see anything of falling crude demand from China until potentially end of March into April and May. Timing of a trade in the physical market has everything to do with what will happen.
7. cancelling cargoes are virtually impossible to do once you have an agreement. Therefore even the closest loading cargoes at ESPO will be more or less impossible to resell because who do you resell it to? All other refiners have already bought their crude oil.
