Page 6 - AfrOil Week 22a 2020

AfrOil COMMENTARY AfrOil
WHY:
The present agreement extends through May and June.
WHAT NEXT:
The market is watching to see which way the dice will roll.
Meanwhile in the US, the oil-drilling fleet shrank for the 11th week to a level not seen since before the shale revolution. While North American shut-ins have peaked, according to Bank of America, US imports of Saudi crude have surged, inflating inventories.
It seems that US stockpiles are heading higher, at least in the short term as more imports come in; at present the market is oversupplied and everyone is looking for more signs of demand firming up.
Market response
So far, the production curbs have been effec- tive. The price of crude rallied by almost 90% last month, a record gain, as shrinking supplies helped to offset pandemic-related demand losses.Yettherallydependsonproducersmain- taining cuts until the crude surplus that has poured into the world’s storage tanks is mopped up. Higher prices could tempt producers to turn the taps back on, undercutting gains.
West Texas Intermediate (WTI) for July delivery fell as much as 3.4% Monday to $34.27, after advancing 5.3% on Friday. The US bench- mark crude pared losses to trade at $34.85 as of 10:25 a.m. in New York. Global benchmark Brent crude for August slipped 10 cents to $37.74.
An earlier OPEC+ meeting would give the producer group more flexibility to change its current production limits, as members usually decide on their plans for shipping oil for July in
the first week of June. The group’s preference is to take short-term measures on cuts, as the situ- ation is changing quickly, the delegate said. The coalition – which includes OPEC’s 13 members plus another 10 exporters – has achieved 92% compliance, according to an estimate by data analytics firm Kpler.
Meanwhile, the US Oil Fund ETF will begin its monthly roll of futures contracts on Monday. The fund plans to sell its July holdings and buy more November and January futures over the next 10 trading sessions.
Chinese resurgence
As Chinese oil demand rises to near pre-corona- virus (COVID-19) levels, more and more tank- ers are shipping crude to the Asian nation from almosteverywhere.
While OPEC has helped global oil markets recover from the coronavirus crisis, the group will soon face a new challenge: the mountain of unwanted crude that piled up during the pandemic.
Falling fuel exports from China are provid- ing a much-needed buffer for refiners elsewhere in Asia that are still grappling with lower con- sumption and poor margins.
Meanwhile, commodities trader Trafigura Group is being investigated by US authorities for alleged corruption and market manipulation related to oil trading, the Guardian reported. The company is particularly involved in South America and Africa.™
NEWSBASE GLOBAL ROUNDUP
NRG: Momentum, but also restraint
Although oil prices have remained relatively stable, global demand is still weak
COMMENTARY
Welcome to the fourth edition of NewsBase’s Roundup Global (NRG), in which our team of international editors provide you with a snap- shot of some of the key issues affecting their regional beats. Get the NRG Oil & Gas Editor’s Picks to your inbox every week for free. Just sign up here.
Crude prices have remained relatively stable over the past week, with both Brent and West Texas Intermediate (WTI) staying above $30 per barrel, and Brent even edging closer to $40 per barrel. However, this relative stability comes as a result of extensive cuts to supply, and all eyes will be on this week’s OPEC+ meeting, where the group will con- sider extending its cuts into July or August.
In the meantime, there is still plenty of news of weak demand, earnings losses and the scaling back of activity in response to market conditions. Some signs of forward momentum are emerging, but such steps are being taken with caution.
Spot prices spiral in Asia
The global oversupply of LNG and the destruc- tion of Asian demand amid the coronavirus (COVID-19) pandemic have sent spot prices spiralling for a second week.
Spot cargoes for July delivery to East Asia fell to $1.85 per mmBtu ($52.39 per 1,000 cubic metres), Reuters reported on June 1.
The newswire pointed to the number of cargoes on the market this week, coupled with depressed industrial demand for gas around the world, as behind the $0.07 per mmBtu ($1.98 per 1,000 cubic metre) decline.
Malaysia’s state-owned company Petronas has said it is “optimising” its production of LNG in response to weaker prices and demand. The com- pany told Reuters this week that challenges relating to the ongoing COVID-19 pandemic meant that it needed to optimise production volume in line with the market slowdown.
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w w w . N E W S B A S E . c o m Week 22 03•June•2020