Crude Oil Prices as at
AM 04/ 06/2020
Oil ended slightly higher on Wednesday but remained below the session’s early highs above $40 a barrel, the highest since March, retreating as doubts emerged about the timing and scale of a potential extension to the pact between OPEC and its allies to cut crude supplies.
Oil prices were supported by a drawdown in U.S. crude inventories in the latest week, but came under pressure as U.S. refined product inventories surged on tepid demand. EIA/S
“As product demand remains subdued, gasoline inventories showed a solid build, while distillates showed a mammoth one – despite refinery runs being over 3.6 million barrels per day below year-ago levels,” said Matt Smith, director of commodity research at ClipperData.
Saudi Arabia and Russia have a deal to extend oil output cuts by a month.
“Prices were firm so far this week on the news that the meeting was earlier,” said Olivier Jakob, oil analyst at Petromatrix. “The retracement today is definitely due to the latest headlines on OPEC.”
Both benchmarks have surged in recent weeks, with Brent more than doubling after hitting a 21-year low below $16 in April, when U.S. crude turned negative.
The OPEC+ group, comprising the Organization of the Petroleum Exporting Countries and allies including Russia, is cutting output by 9.7 million barrels per day (bpd) in May and June, equal to about 10% of global output before the coronavirus crisis.
Talks have been focused on keeping the current level of cuts beyond June. But a one-month extension would be shorter than some sources have said was under consideration.
Oil also weakened on reports that Gulf OPEC producers are not discussing extensions to their deeper voluntary production cuts beyond June.
Pointing to demand recovery, the services sector in China, the world’s second-biggest oil consumer, returned to growth last month, a survey showed.
Some traders hoped a couple of Indian oil tenders could mop up oil to reduce a significant glut of Nigerian oil while European demand for West African grades remains nearly nil amid sluggish refining activity.
India’s IOC has two buy tenders running mostly seeking West African crude. One is for 2 million barrels cargoes loading July 4-13 and the other for 1 million loading Aug. 1-10 and both are set to close on Friday.
India has been a key outlet for Nigerian crude, with repeated tenders sometimes closing with no awardee only to resurface seeking the same grades and delivery dates, as the major importer seeks to secure low prices for orphaned barrels.
A backlog of floating storage continues to hit demand, especially in Europe, where the appetite for new imports will need to wait until the storage backlog is cleared.
Nigerian oil continues to attract almost no buyers there, as refinery activity remains muted amid poor margins and slow demand for some oil products.
Unprecedented producer cuts especially on heavier grades have dealt a boon to Angolan oil, for which there has been significant Chinese demand.
At over a dozen cargoes still yet to be sold for July, Angolan crude is selling at around the same pace as before the global coronavirus pandemic.
Prices are as follows:
(1)Dated Brent =$37.605/bbl (0.115)
(2)Bonny Light =$38.175/bbl (0.310)
(3)QuaIboe =$38.175/bbl (0.310)
(4)Forcados =$38.425/bbl (0.310)
Stay Safe and have a wonderful week was