1. OPEC+ expect a large stock draw into year end. The problem is where is it occuring? OECD Refineries typically hold a specific number of cover days of production. With margins bad, does not matter how cheap crude is they will not increase cover days because of cash flow.
#OOTT

2. Differentials and CFDs remain weak which indicates low demand for crude oil. Floating storage is increasing at points of production but falling at points of discharge. Both indicators of low demand. Refinery runs are not increasing in the OECD with COVID surging.

3. We are already trading December WAF loading barrels which means arrival in China in Jan/Feb and then processed in Feb/Mar at earliest. ME barrels have been bought for November which means arrival Dec/Jan. So all the buying into year end has already been done for China.

4. Sellers are being told that they cannot discharge cargoes for Chinese Independents until 2021. Even then, with port congestion, it is unlikely you will see new independent buying enter Chinese import data until February (beware Chinese new year) or maybe March.

5. Independents have not yet been awarded new quotas for imports in 2021 yet. Therefore, they officially cannot buy anything at the moment. But sellers are taking the risk of sending boats now without any guarantee of being able to discharge. That is how soft the market is.

6. Even with Russia maximising crude flows to Asia (Kozmino etc.) and low NWE exports, North Sea floating storage is continuing to build. NS and med barrels need to be sold locally but with a glut of light sweet there appears to be an overhang in the Atlantic basin

7. Remember, Europe is the dumping ground for Light Sweet. If the market is tight NS will see price increases 1st. But with Libya back, Nigeria/Angola slow, Med and NS forced to sell locally, it likely means low exports from the US to Europe.

8. Overall It means that differentials and CFDs remain very soft and actually weakening.

This is the opposite of a market that would be seeing big inventory draws. A high inventory draw market would be seeing high differentials and a backwardated cfd curve.

9. Why? Because sellers would be wanting to sell their cargoes in floating storage or loading before they sell their cargoes in tanks as it costs them more. Once they had been sold then onland inventories are drained.

10. So where are inventories being drawn? Not at producers (Saudi has shown increased inventories). NWE tanks are full requiring floating storage. Saldanha bay continues to fill. WAF cargoes being moved to sit off Gibralter to wait for buyers.

11. Only OECD country showing draws is the US and that is partially down to OPEC+'s minimising sales to the US. It is the least opaque data so OPEC+ hope that by drawing down US inventories it pushes the price up. But draws are less than 1mbpd anyway.

12. So is OPEC+ assumptions that Chinese inventories are drawing strongly? Satelitte data of Chinese storage does not suggest that is happening.

So are OPEC+ accurate with supply but overestimating demand for their numbers?

13. Before the bulls start their abusive nonsense. i have no skin in the game. I dont trade.