By Justice Derefaka (Technical Adviser on Gas Business and Policy Implementatio to the Honorable Minister of State for petroleum Resources)
Oil prices inched lower on Friday as Hurricane Laura passed the heart of the U.S. oil industry in Louisiana and Texas without causing any widespread damage and companies began to restart operations. Both benchmarks notched weekly gains of about 1.5%, with WTI rising for a fourth straight week. The benchmarks hit five-month highs during the week as U.S. producers cut crude output ahead of Laura at a rate close to the level of 2005’s Hurricane Katrina.
“The oil trade has been featured by strong advances at the start of the week as a sizable amount of storm premium was pumped into the market ahead of Hurricane Laura, followed by a major erasure of hurricane premium following the storm’s arrival as limited impact on offshore crude production or refinery activity was indicated,” said Jim Ritterbusch, president of Ritterbusch and Associates.
The oil market has had an unusually long spell of low volatility, analyst Eugen Weinberg at Commerzbank said, in contrast with stock markets.
“It didn’t even react to a weaker dollar. There’s no impulse in either direction. It has seldom had so little volatility for such a long period, especially given the dynamic situation on the demand and supply sides,” Weinberg said.
Laura, since downgraded to a tropical depression, hit Louisiana early on Thursday with winds of 150 miles per hour (240 km per hour). The storm killed at least six people, damaged buildings and felled trees. Power was cut to hundreds of thousands in Louisiana and Texas, but refineries were spared from massive flooding.
Shut offshore crude oil production in the U.S.-regulated northern Gulf of Mexico remained at 84.3%, or 1.55 million barrels per day (bpd), the U.S. government said in a report.
Meanwhile nine refineries had shut around 2.9 million bpd of capacity, or 15% of U.S. processing capacity, ahead of the hurricane.
Further ahead, demand expectations remained bearish. The contango between Brent crude for nearby delivery and six-months ahead remained near its widest since late May with the front-month contract more than $2 cheaper.
“Aside from Saudi Arabia, everyone else is clear that global oil demand won’t return to 2019 (levels) until at least 2022. The latest monthly estimate from the IEA/EIA/OPEC triumvirate suggests consumption will not recover to pre-pandemic levels next year,” PVM Oil Associates said in a daily note.
Schedules for Nigerian crude oil exports for October had almost completely emerged by Friday, with offers for some key grades steady and even up despite weak demand.
* Total exports of Nigeria’s four main crude oil grades are set to fall slightly in October to 736,000 barrels per day (bpd) from 756,000 bpd planned for September.
* Despite relatively slow sales of the grades, Bonny Light and Qua Iboe crude were on offer for dated Brent plus 50 cents, climbing about 20 cents compared to early last week.
* Traders said the prices were unrealistic and reflected sellers’ projection that there would be a temporary deficit of light sweet oil from the United States due to storm damage.
*Gasoline market *
Northwest European gasoline market fundamentals were little changed day on day amid lower stocks in the Amsterdam-Rotterdam-Antwerp hub. ARA gasoline inventories fell inventories fell 1% to 1.379 million mt in the week to Aug. 27, Insights Global data showed. Gasoline stocks trended lower on the back of rising consumption in Europe, with more people relying on private motor vehicles rather than public transport. TomTom data pointed to a rise in driving activity in Europe, with average road congestion rising on the week in Paris and Berlin. However, despite a decline of 6.5% in US East Coast gasoline stocks reported on Aug. 26 by the Energy Information Administration, gasoline prices corrected downward as Hurricane Laura caused less damage than feared to oil infrastructure in the US, sources said
Prices are as follows:
(1)Dated Brent =$44.875/ bbl (-0.06)
(2)Bonny Light =$44.255/bbl (-0.32)
(3)QuaIboe =$43.905/ bbl (-0.32)
(4)Forcados =$44.355 /bbl (-0.32)
Premium unleaded pms= $409.5/mt (10.00)
0.1% Gasoil= $359.25/mt (2.25)
Clean Tanker freight UKC-WAF= $21.68/mt (-3.34)
Stay Safe and have a wonderful week.