Oil prices soared on Friday, with U.S. futures closing out May with record monthly gains, on hopes that the U.S.-China trade deal would remain intact and on falling crude production.
Both benchmarks saw steep monthly rises due to falling global production and expectations for demand growth as parts of the United States, including New York City, and other countries move to reopen after coronavirus-related lockdowns.
U.S. President Donald Trump said his administration will begin to eliminate special treatment for Hong Kong in response to China plans to impose new security legislation in the territory, but he did not say the first phase of the Washington-Beijing trade deal was in jeopardy.
That put oil investors, worried that a breakdown in trade relations would further hurt oil consumption, at ease.
Oil was also supported by a record-low number of U.S. and Canadian oil and gas rigs, which indicates a further drop in supply out of the world’s biggest crude producer.
The U.S. oil and gas rig count fell by 17 to an all-time low of 301 this week, according to data from energy services firm Baker Hughes Co BKR.N going back to 1940.
The bid-ask spread for West African crude has continued to widen over the past week for July cargoes, reflecting differing expectations between sellers and buyers on the post-lockdown recovery.
Both Angola and Nigerian markets are demonstrating a widening gap between where sellers and buyers see value.
In May, West African crude values have rebounded to previous ranges and, in some cases, exceeded them after historically low prices in April. But as that has happened, the usual 50-80 cents/b bid-ask spread has widened to $1.00-$1.50/b on most grades for July cargoes. On the bullish side of the market, traders point to low freight rates and smaller overall availability of cargoes due to OPEC+ production cuts, as well as steady demand from China and India, as a reason that offers have jumped up more than $1-$1.50/b from June to July cargoes.
As a counterpoint, others refer to still sluggish demand from Europe due to low refining margins, particularly for middle distillates, alongside high product stocks of gasoline and naphtha as reasons buyers were not willing to raise their bids. “On the positive side, freight prices have collapsed and the OPEC cuts have had a big impact on price because you have less than 40 cargoes in Angola and around 50 in Nigeria during the month.
Nigerian trades quite far forward and with the contango so buyers are not pressured to rush to find buyers. Prices have remained stable for early July as China finishes its baseload buying, some sources have said they expected pressure on prices as the remaining unsold barrels try to find homes, particularly Nigerian grades.
Prices are as follows:
(1)Dated Brent =$34.38/bbl (1.10)
(2)Bonny Light =$34.49/bbl (0.845)
(3)QuaIboe =$34.49/bbl (0.845)
(4)Forcados =$34.74/bbl (0.845)