By Justice Derefaka
Oil prices were little changed and have been held in a narrow band over the past two weeks as concerns about a spike in coronavirus cases globally tempers optimism about a recovery in fuel demand.
U.S. crude oil stockpiles rose last week, against expectations for a draw, although gasoline and distillate inventories fell more than expected, data from industry group the American Petroleum Institute showed on Tuesday.
However, it also expected global oil demand would recover through the end of 2021, predicting demand of 101.1 million bpd by the fourth quarter of next year.
Still, expectations that the Organization of the Petroleum Exporting Countries (OPEC) and allies would taper oil output cuts from August and softer U.S. equities added to pressure.
Abu Dhabi National Oil Co (ADNOC) plans to boost oil exports in August, the first signal that OPEC and its allies, together known as OPEC+, are preparing to ease record oil output cuts next month, three sources familiar with the development told Reuters.
Key ministers of the OPEC+ are due to hold talks next week.
Spot market activity was seen to be sluggish in the West African crude markets on July 7, with trades happening only sporadically over the past few trading sessions, said sources.
This came as European refineries finished July buying requirements and began to gear up to trade August barrels.
While some European buyers had been willing to pay ample premiums for heavier West African crude grades such as Angola’s Dalia and Pazflor, amid more expensive local sour grades and tight programs, this unusual opportunity had begun to fade, and it was uncertain whether further Angolan volumes would be landing in the region.
As China’s demand has fallen significantly from the beginning of August’s cycle, the pace of clearing for unsold Angolan has slowed down.
Owing to the fact that the market considers lighter WAF too expensive versus North Sea grades and Azeri Light in particular coupled with ample [US] Midland forcing its way into Europe, Nigerian August cargoes, which tend to trade about a week or two later than Angola in its main spot market, are facing a cooler reception from Europe, despite cheaper freight rates.
Trading sources report that Nigeria has been very quiet for about a week now because of re-pricing of other alternative grades and with ample supply of Med grades and Urals these grades are now more competitive versus West Africa.
Although Freight is an important dynamic but when shorthaul alternatives are also cheap it afford little advantage to Nigerian grades.
Nigerian grades such as Bonny Light and Qua Iboe, while still seeing August offer levels closer to Dated Brent plus $2/b, are now drifting back into double digit territory in order to be able to compete with softening Mediterranean light sweet grades.
Prices are as follows:
(1)Dated Brent =$43.545/ bbl (0.12)
(2)Bonny Light =$43.580/bbl (-0.055)
(3)QuaIboe =$43.680 /bbl (-0.105)
(4)Forcados =$43.680 /bbl (-0.105)
Stay Safe and have a wonderful week.