By Justice Derefaka (Technical Adviser on Gas Business and Policy to the Honorable Minister of State for Petroleum Resources)
*Oil prices steadied on Tuesday as high compliance with supply cuts from the OPEC+ producer group offset demand fears from the new coronavirus.*
Supporting prices on Tuesday, a technical panel found that compliance with OPEC+ oil output cuts in July was between 95% and 97%, according to a draft report seen on Monday by Reuters.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, a grouping known as OPEC+, eased their cuts in August to 7.7 million barrels per day (bpd) from 9.7 million bpd previously.
It is expected that OPEC+ will communicate that they request strict compliance from all members and cheer for the success of the measures to date.
Still, the coronavirus pandemic, which has raged for months, shows no signs of letting up. In the Americas alone, almost 11.5 million have contracted the disease, and over 400,000 people have died as a result of the pandemic, the World Health Organization regional director Carissa Etienne said on Tuesday.
The United States and Brazil are the biggest drivers of the COVID-19 case count in the Americas, Etienne added. “There are still ongoing concerns about COVID and there are continuing concerns about the lack of a deal in Congress for stimulus,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. The U.S. Congress has so far failed to agree on another fiscal relief package to stem economic fallout from the pandemic.
Meanwhile, some European countries have renewed travel quarantines, which impact jet and motor fuel demand.
As market participants looked to start trading of October barrels of west African crude, remaining September cargoes have been slow to clear, traders said Aug. 18. One source estimated that over 45 million barrels of September-loading West African crude remained available, with Nigeria accounting for around half the total. Another source said there were around 10 unsold September cargoes of Angolan crude. Despite the release of the Angolan October schedule Aug. 17 and movement into the trading cycle for the month, none of the remaining September cargoes have traded this week, according to the source. Additionally, offer levels had remained unchanged, one source said. As a result of reduced demand from Asia and a well-supplied European crude market, it was likely that some remaining September cargoes from across West Africa would head into storage, a trader said. In Nigerian trading, Vitol showed a part-cargo of Brass River on a delivered Rotterdam basis in a public offer. The offer was lowered to a premium to Dated Brent of $1.30/b and did not find buying interest. Elsewhere, on top of sluggish demand from Chinese buyers, West African crude has been seeing fresh competition into the country from US crude. State-owned Chinese oil companies returned to buying US crude oil for September-loading and the volume was expected to exceed the last buying spree in May, according to trading sources. At least seven China-bound cargoes, carrying around 14 million barrels of crude, have been scheduled for September loading in the US Gulf Coast in recent days, S&P Global Platts fixtures data showed. Those will arrive through October and November.
*Gasoline prices in the Mediterranean have been buoyant this month amid reduced output at refineries in the region, sources said Aug. 18. *“
The Mediterranean gasoline market is in good shape, with lower run rates” a trader said, citing prompt demand in Italy in particular. With concern growing over rising coronavirus cases in countries such as France and Spain, Italy has avoided the surge seen elsewhere. With a continued lackluster demand-side outlook for September, Mediterranean structure has been in a steepening backwardation, with the August swap assessed at a $3.25/mt premium to the September swap. Meanwhile, a trader said Mediterranean gasoline had been sold to West Africa from Barcelona. Sources had previously noted rising demand from the region, and also from Northwest European markets.
Prices are as follows:
(1)Dated Brent =$45.125/ bbl (0.36)
(2)Bonny Light =$44.64/bbl (0.26)
(3)QuaIboe =$44.44/bbl (0.26)
(4)Forcados =$44.74 /bbl (0.26)
Premium unleaded pms= $409.75/mt (-0.25)
0.1% Gasoil= $376.50/mt (5.00)
Clean Tanker freight UKC-WAF= $16.68/mt (0)
Stay Safe and have a wonderful week.