By Justice Derefaka (Technical Adviser on Gas to the Honorable Minister of State for Petroleum Resources)
Brent oil futures on Tuesday closed at their highest since early March on hopes the United States is making progress on a new economic stimulus package, as well as curbing the coronavirus spread. Those price moves came ahead of the release of an industry report later Tuesday from the American Petroleum Institute that is expected to show a decrease in U.S. crude stockpiles last week. Crude prices turned positive on stimulus hopes and after another positive round of economic data showed manufacturing recovery continued in June,” Edward Moya, senior market analyst at OANDA in New York, said, pointing to better than expected manufacturing data in Asia, Europe and the United States.
Negotiations between congressional Democrats and the White House on a new round of coronavirus relief have begun to move in the right direction, though the two sides remain far apart, the U.S. Senate’s top Democrat said on Tuesday. New U.S. coronavirus cases fell below 50,000 over the weekend for the first time since early July, according to the U.S. Centers for Disease Control.
Despite Tuesday’s price rise, traders said crude remained under pressure due to concerns a fresh wave of COVID-19 infections elsewhere in the world will hamper demand recovery just as major producers ramp up output. The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, were boosting output this month by about 1.5 million barrels per day. U.S. producers also plan to restart shut-in production.
In Europe and Asia, meanwhile, concerns are growing that coronavirus may be spreading in a global second wave, said Paola Rodriguez Masiu of Rystad Energy.
The West African market remained under pressure, as demonstrated by the recent sharp reduction by Angola’s state energy company in the offer prices for its crude.“Sonangol yesterday cut indications by 60 cents…It’s rare for Sonangol to cut the price like that and still those numbers are considered high.The grim picture is the same for Nigerian barrels where margins in Europe are extremely bad in fact almost negative with Nigeria’s distillate-rich grades Bonga and Forcados “under pressure.”
Traders speak of a “buyers market” where refiners can defer purchasing decisions until the last moment secure in the knowledge that there will be crude available. This has been reflected in the August overhang across the West African complex, with people last week seeing as many as 20 million barrels of Nigerian crude available from August.
The market will now be looking toward Indian Oil Corp.’s first tender for West African crude since July 21. IOC is seeking crude loading in the first decade of October 1-10.The state-owned oil refiner will announce the winner Aug. 6.
Fuel demand in India continued to decline in the first half of July with many states ramping up lockdown measures to combat another wave of novel coronavirus infections. IOC has reduced the run rate to 75% at its nine refineries, compared to an average of 93% during the first week of July, when the second phase of the reopening of the Indian economy began. India’s weakening demand comes at a time when China, the most important buyer of West African crude, is experiencing oversupply and congestion around its ports.
Prices are as follows:
(1)Dated Brent =$44.17 / bbl (0.125)
(2)Bonny Light =$43.755/bbl (0.14)
(3)QuaIboe =$43.555 /bbl (0.14)
(4)Forcados =$43.905 /bbl (0.14)
Premium unleaded pms= $376.5/mt (-2.25)
0.1% Gasoil= $370.25/mt (1.75)
Clean Tanker freight UKC-WAF= $19.18/mt (0)
- Stay Safe and have a wonderful week.