Oil prices slipped slightly on Monday amid concerns about a stalled global economic recovery and with Libya poised to resume production, and failed to get support from an impending storm which has disrupted U.S. output.
“The storm is taking production offline in the Gulf of Mexico, and the market doesn’t care – that shows just how bad the situation is,” said Bob Yawger, director of energy futures for Mizuho in New York.
Hurricane Sally gained in strength in the Gulf of Mexico, west of Florida on Sunday and was poised to become a category 2 hurricane.
The storm forced energy firms to shut 21.4%, or 395,790 barrels per day (bpd), of offshore crude oil production in the northern Gulf of Mexico, the U.S. government said on Monday.
The storm is disrupting oil production for the second time in less than a month after Hurricane Laura swept through the region.
Typically oil prices rise when production is shut down, but with the coronavirus pandemic getting worse, demand concerns are to the fore, while global supplies continue to rise.
The path towards global fuel demand recovery is likely to be rocky, several senior industry executives said.
The Organization of the Petroleum Exporting Countries said on Monday that world oil demand would tumble by 9.46 million barrels per day (bpd) this year, a sharper decline than it predicted in a report a month ago.
In Libya, commander Khalifa Haftar committed to ending a months-long blockade of oil facilities, a move that would add more supplies to the market.
“If Libya’s production comes back online soon, we are talking about 1 million barrels per day or more, this will be a significant addition to the global balances. And the market is pricing this in today,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
A hefty overhang of Nigerian crude remained on Monday, but some Angolan cargoes cleared.
Even after a flurry of activity toward the end of last week cleared some barrels, a large overhang of unsold September- and October-loading West African crude remained ahead of the publication of November programs this week.
Uruguay’s ANCAP bought a cargo of Qua Iboe from Vitol via its latest tender.
* India’s IOC took cargoes of Akpo and Forcados from Total loading in the first 10 days of November.
Fewer than 10 October cargoes of Angolan crude were still unsold, one trader estimated, adding that was unusually large considering the stage in the trading cycle. The provisional November schedule was expected to be released by Sept. 16. Those cargoes that had sold were not necessarily headed to end-users, however, with participants increasingly looking toward floating storage options, according to traders. In addition, holding a ship unsold on demurrage was supported by low freight costs, further motivating sellers to leave oil unsold and wait for an improvement in demand.
In Nigerian trading, a greater volume of unsold crude remained and offer levels had been coming down, in particular for Qua Iboe where a lack of demand from the East had increased the pressure in recent weeks, traders said. The overhang of unsold cargoes of Qua Iboe included some September-loading oil, as well as at least two floating — one off Gibraltar and another off Singapore. Nigeria’s distillate-rich Egina, which typically commands a quality premium over the bulk of the country’s output, had been offered at Dated Brent plus $1/b, the first source said. Although the offered level was already low in historical terms for the grade, its traded value was likely be significantly lower, according to the source.
The Prices are as follows:
(1)Dated Brent =$38.396 /bbl (-0.65)
(2)Bonny Light =$38.265 /bbl (-0.48)
(3)QuaIboe =$37.865 /bbl (-0.48)
(4)Forcados =$38.365 /bbl (-0.48)
Premium unleaded pms= $380.5 /mt (-1.5)
0.1% Gasoil= $311.00/mt (-3.75)
Clean Tanker freight UKC-WAF= $20.85/mt (0)
Stay Safe and have a wonderful week.