Demand for oil recovers in India and China as they soak up large amounts

The recovery of demand for oil in India and China has seen the volume of crude oil stored on ships come down from the peak it was earlier in May.

3.4 million tonnes (24.8 million barrels) of crude was discharged from floating storage into markets in Asia in the past few days, with China receiving 1.8 million tonnes and India 842,679 tonnes. These figures are by oil analytics firm Vortexa.

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Increase in demand from China and OPEC+ production cuts supported the price of crude and the Brent’s contango price has narrowed. Vortexa analyst Serena Huang said, “Rising crude prices and narrowing (Brent) contango with the tightening of the crude market are nibbling away incentives of storing crude on tankers.”

Kpler data shows that floating oil storage came down to 29.4 million barrels on May 26th  from 35.4 million barrels on May 23.

Refiners are buying more oil as they hope oil demand recovers following easing of restrictions in many countries. They also anticipated that prices of crude and freight will rise, although refining margins still remain weak.

“While we’re seeing signs of global demand recovery, we’re still in the early days of a long road to full recovery, and the outlook remains uncertain on whether there could be a second wave of coronavirus,” Huang said.