By Justice Derefaka
Oil prices dipped as concerns about renewed COVID-19 lockdowns in the United States outweighed signs of a recovery in U.S. gasoline demand.
Oil prices rose on as data from the U.S. Energy Information Administration showed U.S. gasoline stockpiles fell by 4.8 million barrels last week, much more than analysts had expected, as demand climbed to 8.8 million barrels per day (bpd), highest since March 20.
A spike in COVID-19 cases across several U.S. states, however, raised the prospect of renewed lockdowns that would likely hold back any sustained recovery in fuel demand.
That has kept the benchmark crude contracts in tight ranges this week, although holding above $40 a barrel.
Gasoline demand was falling in areas where lockdowns were being reinstated in the United States, while demand on the U.S. East Coast, where coronavirus infections were under control, was recovering well.
The market is also in a holding pattern ahead of a meeting on July 15 of the market monitoring panel of the Organization of the Petroleum Exporting Countries (OPEC) and its allies.
Together called OPEC+, the producers could decide to pare or extend their record 9.7 million bpd supply cut from August.
In West African crude markets expectations of stable or even increasing prices for Nigeria’s August program had failed to materialize as competing light sweet grades and underwhelming refinery margins kept many buyers on the sidelines during the spot market period.
Offer levels for many Nigerian August cargoes had dropped 30-50 cents/b since the previous week, said trading sources. While appetite for Nigeria’s light sweet grades was unchanged and even higher on the tender side of the market for August cargoes, particularly with recent lower freight costs, as the timings had now moved into September, traders said spot market activity was sluggish.
“It’s been very slow in Nigeria and we haven’t seen much happening, with both Dated and freight running up… As a result, differentials are drifting down,” said one crude trader.
August levels for flagship Nigerian crude grades such as Bonny Light and Qua Iboe were around Dated Brent plus 50-70 cents/b, down from the $1/b plus prices seen for end- July cargoes, which benefited from less expensive freight rates at the time, said sources.
Prices are as follows:
(1)Dated Brent =$43.225/ bbl (-0.32)
(2)Bonny Light =$43.255/bbl (-0.325)
(3)QuaIboe =$43.355 /bbl (-0.325)
(4)Forcados =$43.355 /bbl (-0.325)
Stay Safe and have a wonderful week.