By Justice Derefaka (Technical Adviser on Gas Business and Policy Implementation to the Honorable Minister of State for Petroleum Resources)
Oil futures fell after big declines the previous session with Brent sliding below $40 a barrel for the first time since June as COVID-19 cases rebounded in several countries.
The biggest global health crisis in a century continues to flare unabated with cases rising in India, Great Britain, Spain and several parts of the United States, where the infection rate has not come under control for months.
The outbreak is threatening hopes for a global economic recovery that could impact demand for fuels from aviation gas to diesel.
Both oil benchmarks are below trading ranges that had persisted since August. Brent fell for a fifth day and has lost more than 10% since the end of August.
Labor Day weekend marked the end of U.S. summer driving season when gasoline demand is greatest, compounding both a supply and demand problem in the market.
With refiners dropping run rates in the coming weeks as turnaround season begins, crude storage is going to climb even higher than near historic highs.
On Monday, crude fell after Saudi Arabia’s state oil company Aramco cut the October official selling prices for its Arab light oil, a sign of softening demand.
“The Saudi price cuts announced Sunday made WTI unattractive to Asian buyers,” said Colorado-based energy analyst Phil Verleger of PK Verleger LLC.
Still, oil has recovered from historic lows hit in April, thanks to a record supply cut by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+. The producers are meeting on Sept. 17 to review the cuts.
Angola’s Sonangol sought to sell its last remaining spot cargoes as large volumes of Nigerian crude still sought buyers amid several buy tenders set to close this week.
* State oil company Sonangol was down to its last three spot cargoes, and continued to offer a cargo of Cabinda and two of Dalia.
* Indonesia’s Pertamina is running a tender for November and December-exporting crude, continuing a pattern of frequent tendering for distant arrival.
* India’s IOC issued a buy tender for delivery in the first 10 days of November.
* Uruguay’s Ancap is also running a buy tender. All the tenders are set to expire on Wednesday.
* Traders noted that contango market structure and low freight rates were encouraging buyers and trading houses to buy crude into floating storage, though no newly-bought West African oil has yet been destined for storage.
* Nigerian cargoes were selling more slowly than Angolan and other heavy, sweet West African grades, with even cargoes scheduled for export in August yet to find buyers.
The Prices are as follows:
(1)Dated Brent =$38.505 /bbl (-1.995)
(2)Bonny Light =$38.415 /bbl (-2.18)
(3)QuaIboe =$38.015 /bbl (-2.18)
(4)Forcados =$38.515 /bbl (-2.18)
Premium unleaded pms= $371.5 /mt (-21.25)
0.1% Gasoil= $307.5/mt (-18)
Clean Tanker freight UKC-WAF= $21.68/mt (0)
Stay Safe and have a wonderful week.