By Justice Derefaka (Technical Adviser on Gas Business and Policy Implementatio to the Honorable Minister of State for petroleum Resources)
Crude oil prices rose to a five-month high on Tuesday as U.S. producers shut most offshore output in the Gulf of Mexico ahead of Hurricane Laura even as rising coronavirus cases in Asia and Europe capped gains.
That was the highest closes for both benchmarks in the futures market since March 5, the day before Saudi Arabia and Russia failed to agree on a new plan to cut output and about a week before the World Health Organization declared COVID-19 a pandemic.
U.S. producers cut crude output ahead of Hurricane Laura at a rate approaching the level of 2005’s Hurricane Katrina and also halted most oil refining along the Texas/Louisiana coast.
Laura is expected to strengthen into a major hurricane with 115 mile per hour (185 kph) winds before it strikes the coast near the Texas-Louisiana border early Thursday, according to the U.S. National Hurricane Center.
On Tuesday, producers had evacuated 310 offshore facilities and shut 1.56 million barrels per day (bpd) of crude output, 84% of Gulf of Mexico’s offshore production, near the 90% outage that Katrina brought 15 years ago.
“Today’s strength was again almost entirely attributable to storm concerns,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, noting the storm factor would likely overshadow the weekly storage report from the U.S. Energy Information Administration (EIA).
Analysts forecast U.S. crude stockpiles fell for a fifth week in a row last week, according to a Reuters poll conducted ahead of reports from the American Petroleum Institute (API) at 4:30 p.m. (2030 GMT) on Tuesday and the government on Wednesday. EIA/S
*Overall, hurricanes may be limiting supply this week … but the market will soon again focus on the biggest hurricane of them all, COVID-19*
Europe is seeing a rise in coronavirus cases, including re-infection. Two re-infections were reported in Europe and one in Hong Kong.
China’s Unipec offered Angolan cargoes for sale on Tuesday, underlining the limited extent of demand from major consumers, while Nigerian crude was heard to be under pressure.
October loading programmes were being issued for some grades. The schedules for Qua Iboe, Forcados and Bonny Light emerged on Monday.
* There is still a sizeable overhang of September-loading crude which is competing with U.S. crude exports in Europe, putting downward pressure on differentials, traders said.
* Qua Iboe was last heard offered at around dated Brent plus 25 cents and expected by some traders to sell for below zero.
Amid prompt gasoline demand expected over the next two weeks in Italy, the Mediterranean market moved into a steeper backwardation driven by supply-side fundamentals, sources said Aug. 25. “The Med gasoline market structure is influenced supply-led than demand-led fundamentals” a trader said. The balance-of-month August Mediterranean swap was assessed at a $4.50/mt premium to the September swap. Refinery utilization rates in the region have not recovered to their pre-pandemic levels, while a planned turnaround at Hellenic’s Aspropyrgos refinery in the third quarter may see supply tightness continue in the eastern Mediterranean. Physical gasoline prices in the Mediterranean and Northwest Europe reached their highest levels since the start of the coronavirus pandemic, amid gains in the broader crude oil complex. Premium unleaded FOB AR barges were assessed up 2.1% at $425.00/mt, the highest outright value since March 9. Concerns over hurricanes in the US Gulf Coast drove oil higher, while some hurricane-driven strength was also seen in US Atlantic Coast freight markets.
Prices are as follows:
(1)Dated Brent =$45.985/ bbl (1.18)
(2)Bonny Light =$45.065/bbl (0.99)
(3)QuaIboe =$44.766/ bbl (0.94)
(4)Forcados =$45.165 /bbl (0.99)
Premium unleaded pms= $425.00/mt (9.00)
0.1% Gasoil= $373.5/mt (3.50)
Clean Tanker freight UKC-WAF= $28.36/mt (9.18)
Stay Safe and have a wonderful week.