By Justice Derefaka (Technical Adviser on Gas Business and Policy to the Honorable Minister of State for Petroleum Resources)
*Oil prices settled higher on Monday,* as OPEC+ producers almost fully complied in July with their global production cut accord, and after U.S. officials said China is in compliance with the first phase of the two nations’ trade deal. Compliance with OPEC+ oil output cuts is seen at around 97% in July, two OPEC+ sources told Reuters. The oil-producing nations have been cutting output by record levels to curb supply and reduce worldwide inventories.
China is living up to its end of the trade deal the two parties signed in January, U.S. President Donald Trump said on Monday, even though the nation has fallen short so far of promised purchases of U.S. products.
Chinese state-owned oil firms have tentatively booked tankers to transport at least 20 million barrels of U.S. crude for August and September. There’s indications of demand picking up in China…we are not in a bull market by a long run but the demand story in China really seems to be what the market is focusing on,” said John Kilduff, partner at Again Capital in New York.
Investors are waiting on Wednesday’s ministerial OPEC+ committee, known as the JMMC, that will review compliance with the global oil supply reduction pact, although no change in the agreement is expected.
In August, the Organization of the Petroleum Exporting Countries and allies known as OPEC+ eased its agreed cuts to 7.7 million barrels per day (bpd) from 9.7 million bpd previously. Later-dated Brent futures contracts suggest traders see inventories remaining high in coming months due to weakened demand.
Last week the U.S. Energy Information Administration adjusted global oil demand downward, suggesting a smaller than previously expected reduction in global inventories.
*The West African crude market* took its first steps into the October trading cycle on Aug. 17 with the release of the provisional schedule for Angolan crude. Angola’s crude loadings in October are set to fall an average 71,290 b/d month on month to 1.24 million b/d across 40 cargoes totaling 38.4 million barrels, according to a copy of the provisional schedule seen by S&P Global Platts. In September, there were 41 cargoes scheduled to load for a total of 39.3 million barrels. The market will look toward September official selling prices for Nigerian crude and October loading programs, expected later this week, as it moves into October trading.
Even as the market prepared to start trading October barrels, activity had been very slow, with an ample supply of September-loading crude still available, according to traders.
**After falling sharply at the start of August, the Northwest European **gasoline crack hit a three-week high on Aug. 17, of $3.10/b. The crack remained at pre-coronavirus pandemic levels. It was assessed at $8.40/b a year ago. Meanwhile, premium unleaded FOB AR barges were assessed at $410/mt, up 2% on the day to the highest outright price since the start of the pandemic. In France, data from industry group UFIP showed gasoline consumption in July rose 2.7% month on month. The rise came with many European’s opting to holiday domestically, and drive rather than fly and against a backdrop of January–July road fuel deliveries being down 19.4% year on year. Elsewhere, commodity data company Kpler said gasoline exports from Northwest Europe to the Atlantic coast were expected to be 50% lower in August, compared with July, at 3.92 million barrels. While gasoline demand was expected to rise in the US, the ongoing coronavirus pandemic in many states had dampened driving demand in the holiday season. The USAC is a key outlet for excess Northwest European gasoline barrels. West Africa’s key gasoline short, Nigeria, was also expected to see exports fall by around 30% in August from July, to 3.35million barrels, according to Kpler.
Prices are as follows:
(1)Dated Brent =$44.765/ bbl (0.25)
(2)Bonny Light =$44.380/bbl (0.44)
(3)QuaIboe =$44.180/bbl (0.44)
(4)Forcados =$44.530 /bbl (0.44)
Premium unleaded pms= 418.00/mt (8.25)
0.1% Gasoil= $371.50/mt (0.75)
Clean Tanker freight UKC-WAF= $16.68/mt (0.42)
Stay Safe and have a wonderful week.