DAVOS, Switzerland (Reuters) - Oil prices are likely to stabilise around current levels after months of sharp falls, despite a large oversupply that is filling inventories worldwide, the chief executive of Swiss-based commodities trader Mercuria said on Thursday.
Marco Dunand said he expected global onshore and offshore oil storage to approach 400 million barrels in the first quarter of 2015 as production exceeds demand. He gave no figure for current oil stock levels.
Oil prices have fallen by almost 60 percent in the last six months to around $48 a barrel.
“Oil prices will stabilise around here but the next two months will be very important,” Dunand said in a statement sent to Reuters. “Today we are building up crude inventories as refineries are going into maintenance.”
“Given that production was exceeding demand by 1-1.5 million barrel per day (bpd) in the past months, we could be approaching a figure of 400 million barrels of oil being stored onshore and offshore in the first quarter of 2015.”
Oil traders say storing oil is now extremely lucrative because oil for immediate delivery is heavily discounted below futures prices, in a market structure known as a contango.
“Whoever has storage this year - will win. Not necessarily traders - but oil companies too and even refiners,” Dunand said, adding that an equivalent of 2-2.5 percent of global oil supply was now going into storage.
“There is still sufficient storage capacity around the world. Since 2009, when a lot of oil was stored onshore and offshore, a lot of new storage capacity has been built and a lot of refineries were turned into storage.”He said there was a lot of spare oil storage capacity in the United States.
“China is, of course, taking advantage of the situation and is filling its strategic storage very actively.”
Dunand said low oil prices were likely to depress production in the second half of this year, and lower production could eventually lead to higher prices.
“So what happens if supply gets depressed by, let’s say 5 percent? We will be straight moving into a deficit.”
“If we under-invest over the next two years, we could see a sharp oil price spike,” he added.
Writing by Christopher Johnson; Editing by Michael Urquhart