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Commodities

Oil falls over comments on U.S.-China trade deal being “over” 

The statement crushed the hopes of many investors who had been expectant as a result of previous gains.

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Oil price slump continues as second wave of covid-19 may crush the oil marketOil falls over comments on U.S.-China trade deal being “over” 

Oil retreated on Tuesday morning in Asia, going down from its earlier gains in the session. The fall had come as a result of comments made by White House trade adviser, Peter Navarro, to the press on Monday that the U.S.’s trade deal with China is “over.”

The statement came as a shock to investors who had been optimistic about salvaging the phase one trade deal that was reached earlier in the year.

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Brent oil futures dropped by 0.46% to $42.88 by 10:17 PM ET (3:17 AM GMT) and WTI futures also fell by 0.61% to $40.48.

The risks of an escalation of U.S.-China tension is that there could be a delay in the global economic recovery from the COVID-19 pandemic, thereby increasing the risks of an oversupply. China is yet to respond to Navarro’s comments.

In the previous session, Brent futures gained 2.1% and WTI futures rose almost 2%; however, the statement has crushed the hopes of many investors who had been expectant as a result of the previous gains.

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(READ MORE: Brent Crude falls, U.S Crude Oil Inventories record a two week high)

Albeit panicked, investors are currently waiting for the predictions in crude oil supply to be announced by the American Petroleum Institute (API) as well as the U.S. Energy Information Administration (EIA), which is due later in the day and on Wednesday respectively. 

 

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Patricia
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Commodities

Nigerian crude grades yet to rally because of U.S Shale

Bonny light sold for $43.33, far below the price Nigeria sold its crude months ago.

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U.S Shale, Naira under pressure, as crude oil hits $25 per barrel, Oil Price: A dead cat bounce in the making?, Bears tear Crude oil futures into shreds as Brent slumps more than 20%

Crude oil prices for lighter Nigerian grades have not experienced the rally its category is presently having, despite significant draws on stockpiles in Europe, as cheaper substitutes like U.S Shale continue to be more attractive to importers, according to a report released by Reuters.

Bonny light, according to oilprice.com, sold for $43.33, far below the price Nigeria sold its crude months ago, at a discounted rate to attract buyers. However, consistent Indian buying continued to buoy Nigerian differentials, especially for some medium grades.

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READ MORE: Investors gain N15.58 billion amidst sell-offs in Nigerian bank stocks 

Quick fact: Brent crude is the leading global benchmark for Atlantic basin crude oils. The international benchmark is used to set the price of crude oil of about of two-thirds of the world’s traded crude oil, including Nigeria’s crude.
Africa’s largest producer of crude oil and gas, Nigeria, gets most of its oil from the Niger Delta area, and its relatively classified under two specification based on its lightness and gravity, the heavier grade with a specification of, 20–25 gravity. The lighter grade with a specification of 36 gravity and both Nigerian grade types are low in sulfur and paraffinic.

Examples of Nigerian grades include Bonny light, Brass River and Qua Iboe.

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Recall that three months ago the price of Bonny Light, one of Nigeria’s crude grades, had dropped to about $12–$13 a barrel because the major market for Nigerian Crude, had experienced economic depression triggered by the COVID-19 pandemic.

READ MORE: Nigeria’s crude export could suffer because of ExxonMobil

Also, it went so bad that even with lower oil prices, long-haul buyers from Asia did not want Nigerian oil cargoes because of shipping costs to pay and no real need for the oil barrels since demand has plunged.

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Patricia
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Commodities

Crude oil prices fall over lingering concerns on world’s largest consumer

Both International benchmarks for crude gained more than 2% yesterday.

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Oil prices gain likely to halt over demand uncertainty as US-China tension intensifies

Crude oil prices plummeted on Friday morning as the resurgence of COVID-19 picked up globally, especially in the world’s largest economy and consumer of crude oil (United States), dampened the optimism for strong demand in energy goods.

Brent crude futures lost 0.70% to trade at $42.84 a barrel at 4.30 am Nigerian local time, and the West Texas Intermediate also dropped 0.8%, to trade at $40.31 a barrel.

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Quick fact: Both International benchmarks for crude oil gained more than 2% yesterday, triggered by positive macros coming from the U.S Job report and falling U.S. crude inventories. For the week, Brent crude is up 4.3% and WTI is up 5.6%.

READ ALSO: Shell warns investors it may write down up to $22 billion due to oil crash

Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, explained in detail the lingering concerns about the world’s largest consumer of crude oil. He said:

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“The demand concerns continue to linger amid a rise in gasoline stockpiles as the number of confirmed coronavirus cases in the US climbed to an all-time high of more than 50,000 on Thursday.

“And as significantly, the infection curve rose in 40 out of 50 states in a reversal that has mostly spared only the Northeast. Indeed, faltering re-opening of US States as Covid-19 cases rise remains the primary thorn in the oil bulls’ side.

READ MORE: Nigeria’s external reserve drop by $261 million in 15 days, oil firms to sell forex to CBN 

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“But worrisome for oil prices are the densely populated southern US states that have been ravaged by the virus and are among the US’s most weighty consumers of gasoline.

“With the latest state government health advisory imploring Sun Belt citizens to restrict movements coupled with the re-imposition of localised lockdowns, there is a detectible level of uncertainty in the oil market heading into what is traditionally one of the busiest driving weekend of the year, the July 4th celebration weekend.”

However, some oil traders and investors remain optimistic that the price of crude will maintain its bullish momentum in the midterm, as long as certain parameters are kept in place.

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“The market has become increasingly confident that easing restrictions on travel and business would boost demand for crude oil, but the pandemic’s progress threatens to derail this recovery,” ANZ Research said in a note.

“The recovery in gasoline demand will plateau until the U.S. economy improves,” it concluded.

Patricia
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Commodities

OPEC production output now at lowest level in nearly 30 years 

Production cuts from OPEC countries and other allies have helped to revive the price of Brent Crude.

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OPEC+ Alliance, US, Russia, Canada, Mexico reach historic deal to cut 13.4 million bpd, Oil market still uncertain over the OPEC+ deal as prices react positively, 7 oil producing countries most affected by covid-19, see where Nigeria is placed

The production output of the Organisation of Petroleum Exporting Countries (OPEC) member-countries has recorded its lowest level in nearly 30 yearsdue to production cuts after demand was heavily impacted by the COVID-19 pandemic. The last time oil production was cut to 22 million barrels a day was during the Gulf War in 1991. 

Last month, OPEC cut production to 22.69 million barrels per day, in an effort to strengthen global prices for the commodity which was struggling with weak demand during a global lockdown occasioned by the pandemic. 

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READ MORE: Largest private investment in Africa begins $15 billion financing

OPEC leader, Saudi Arabia, has been compliant in its production cuts through the month of June. Back home, Nigeria has promised to do its parts in implementing total compliance with the cuts. 

Production cuts from OPEC countries and other allies such as Russia (OPEC+) have helped to revive the price of Brent Crude to over $40 since May, compared to record lows in the month of April. 

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While the Gulf nations have implemented further cuts, Nigeria, Angola and Iraq are still lagging in full compliance, meeting only 77%, 83%, and 70% (respectively) of their quotas. Saudi Arabia reduced production by 1.13 million barrels to 7.53 million a day in June. 

READ ALSO: Brent crude surges past $40, analyst recommends investment in crude oil derivatives

Other members like Venezuela pumped only 340,000 barrels a day in June, even though they are exempted from cuts as the country is dealing with a series of issues from US sanctions to a severe economic recession. 

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Meanwhile, Russia hit its target quota for the second month in a row as countries outside the OPEC also cut production due to falling demand impacted by the COVID-19 pandemic. 

Patricia
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