By Justice Derefaka
Oil prices rose on Friday but remained capped on concerns that continued spread of the novel coronavirus could stall the United States’ economic rebound.
The highs early in the session came after Iraq and Kazakhstan, during a meeting of an OPEC+ panel on Thursday, pledged to comply better with oil cuts, sources said. This means curbs by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, could deepen in July.
In a further sign of market recovery, Brent on Thursday moved into backwardation, where oil for immediate delivery costs more than supply later, for the first time since March. LCOc1-LCOc2
A premium for oil for immediate delivery usually indicates tightening supply and encourages storage to be drawn down.
According market player: The U.S. unemployment rate will likely be “at double-digit levels” at the end of 2020 and cautioned against reopening the economy too quickly after the end of lockdowns aimed at containing the virus.
Heightening fears, Apple announced that it would re-close certain stores as the virus spread further.
“It’s spooked everyone in North and South Carolina,” said John Kilduff, partner at energy hedge fund Again Capital in New York.
U.S. crude stockpiles hit another record this week, but fuel inventories fell. EIA/S
The U.S. oil and gas rig count, an early indicator of future output, fell to a record low for a seventh week in a row, dropping by 13 to 266 this week, according to data from energy services firm Baker Hughes Co going back to 1940.
Angola’s July exports had almost all sold out by Friday and Vitol likely won an Indian buy tender.
Only a small handful of Angolan crude cargoes remain for export in July and have taken an unusually long time to sell.
Significant product inventories in China and the exhausting of the latest import quotas by teapot refineries there has led to slower sales and ebbing differentials for heavier oil grades from West Africa.
Reduced exports from Iraq in line with a producer pact to rein in supply especially affects supply to India, and traders expect Nigerian oil will likely benefit especially if Indian refiners begin to seek more sweet oil.
Official selling prices for Nigerian exports for July are expected imminently, with traders expecting little change to light sweet crude prices due to lacklustre European demand and persistently poor refining margins.
Vitol likely won two buy tenders for four million barrels of oil, including mostly West African grades – one is for Sept. 1-10 delivery and the other for Oct. 1-10 – traders said, but details did not emerge.
Prices are as follows:
(1)Dated Brent =$42.695/ bbl (1.27)
(2)Bonny Light =$41.705/bbl (1.265)
(3)QuaIboe =$41.705 /bbl (1.265)
(4)Forcados =$42.005 /bbl (1.265)
Stay Safe and have a wonderful week