Dubai — Saudi Arabia's domestic crude oil stockpiles have climbed to the highest since the coronavirus pandemic hit the market hardest in April, with analysts saying Asian refineries are struggling to keep up with term commitments.
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Saudi crude stockpiles were 78 million barrels as of Sept. 23, the highest since April 26, according to data analytics firm Kpler. Global oil demand hit a low point in April as the coronavirus spread, the International Energy Agency said in its monthly report on Sept. 15.
The kingdom's crude stockpiles are climbing because of weak refining margins, relatively high official selling prices for September cargoes and shrinking domestic consumption, according to Zhuwei Wang, lead Middle East analyst at S&P Global Platts Analytics in Dubai. Maintenance at the Ras Tanura refinery also boosted inventories with "external demand remaining weakened," he said.
The Kpler data is from more than 10 installations, led by Juaymah, with Saudi Arabia's crude capacity of 121.74 million barrels
Asian refineries are considering whether they can maintain their commitments to buy crude from core OPEC sellers with margins "terrible," according to Mike Muller, director of oil business development and head of trading at Vitol Asia.
"It's the time of year when people have to start thinking about budgeting for next year and refining margins are terrible," Muller told a Gulf Intelligence webinar on Sept. 20. Refineries "are the ones that are buying the oil and they're the ones that are going to have to make judgments over what they pay for the oil and what terms they buy."
Many refineries in Asia have 75% and 80% term commitments "and that's more than they're running their refineries at," he said.
With winter approaching for the Northern Hemisphere, "we will enter unchartered territory regarding the virulence of COVID-19," the IEA said in its September report. "In last month's report, we said that the market was in a state of delicate rebalancing. One month later, the outlook appears even more fragile."