By Justice Derefaka (Technical Adviser on Gas Business and Policy to the Honorable Minister of State for Petroleum Resources)
Oil prices edged lower on Friday on worries that demand would recover more slowly than expected from COVID-19 pandemic lockdowns, while rising supply also overshadowed optimism over falling crude and fuel inventories. This week, two prominent forecasters, the International Energy Agency and the Organization of the Petroleum Exporting Countries, trimmed their 2020 oil demand forecasts. OPEC and its allies are increasing output this month.
“The big-picture question is whether the spread of coronavirus is going to continue to impact on the return of gasoline and diesel demand,” said Andy Lipow of Lipow Oil Associates in Houston.
Prices were bolstered earlier in the week by U.S. government data showing crude oil, gasoline and distillate inventories falling last week as refiners ramped up production and demand for oil products rose.
“If that trend continues, it’s very supportive of prices and should drive prices higher,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
The number of U.S. oil and gas rigs, an indicator of future supply, fell this week for a 15th straight week to record lows, according to energy services firm Baker Hughes.
“The market wants to break out, but we don’t seem to be able to follow through just yet because of these lingering questions about the coronavirus,” Flynn said.
Oil has recovered from lows touched in April, when WTI briefly turned negative. Still, a rise in the number of novel coronavirus infections has limited gains. India reported another record daily rise in cases on Thursday.
OPEC and allies including Russia, a group known as OPEC+, have cut output since May by around 10% of pre-pandemic global demand to support the market. The deal calls for an increase in output this month as demand recovers.
The lack of activity on the West African crude market throughout this week will likely concern sellers, with as much as half of the Nigerian program for September still available, sources said Aug. 14. That was with loading programs for October and official selling prices expected in the week starting Aug. 17. “The only cargoes moving are into tenders…on the spot market it is too expensive still, even though people are discounting more and more there will be further discounting to try to avoid a significant overhang again going into the next cycle. The wider weakness on the West African market reflected the lack of demand from China as well as the abundance of cheap US crude heading into Europe and the pressure of refinery margins.
Prices are as follows:
(1)Dated Brent =$44.515/ bbl (-0.545)
(2)Bonny Light =$43.94/bbl (-0.495)
(3)QuaIboe =$43.74 /bbl (-0.495)
(4)Forcados =$44.09 /bbl (-0.495)
Premium unleaded pms= $401.75/mt (-1.25)
0.1% Gasoil= $370.75/mt (-1.5)
Clean Tanker freight UKC-WAF= $16.26/mt (-0.42)
Stay Safe and have a wonderful week.