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Commodities

Crude oil futures gain as U.S crude oil inventories drop

OPEC+ is expected to further step up oil production cuts beyond the July expiry date.

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Crude oil prices slump, as partial lockdowns resume

Crude oil price gained some ground on Wednesday morning, with oil traders’ positive sentiments heightened after the world’s largest consumer of oil reported a significant decline in its crude oil inventories, yesterday.

The American Petroleum Institute (API) estimated an 8.322 million-barrel draw for the week ended July 10. The draw was bigger than analysts’ forecasts of a 2.1 million-barrel draw, and reversed the previous week’s 2 million-barrel build.

Brent crude gained about 0.42% to $43.08 at 5.30 am local time. Also, the other international benchmark for oil, the West Texas Intermediate, gained 0.45% to trade at $40.47.

READ ALSO: Nigeria only hit 56% of its target revenue in first five of months of 2020 

Amid the worsening COVID-19 situation globally, OPEC+ is expected to further step up oil production cuts beyond the July expiry date.

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Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, spoke about efforts being made by the Saudis to ensure a smooth OPEC+ meeting scheduled for today. He said:

“However positive for oil prices is that Saudi Arabia is laying the foundations for a relatively smooth OPEC+ meeting on Wednesday with a joint statement released from the Saudi Arabian and Iraqi Energy Ministries, complementing Iraq for progress implementing production cuts.

READ ALSO: Global oil prices drop after reports of unexpected inventory build

“At the same time, Saudi Arabia’s energy minister has also had a discussion with his Nigerian counterpart, following which Nigeria said it would compensate through September for producing over its agreed quota in May and June.”

READ MORE: What is holding oil price?

OPEC+ is scheduled to meet later today to discuss the future level of production in crude oil. The meeting will decide whether to extend output cuts of 9.7 million barrels per day (bpd) due to end in July, or decrease the cuts to 7.7 million barrels per day.

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Olumide Adesina is a French-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment Trading. A member of the Chartered Financial Analyst Society. Financial Market; Yale University, Behavioral Finance; Duke University. You can follow Olumide on twitter @tokunboadesina or email [email protected]

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Commodities

Where is oil headed in the short term?

Oil prices may fall again if there is another surge in Coronavirus cases.

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What is holding oil price?

Oil prices have risen by 128% from it’s April low as it has steadied above $40 a barrel since mid- June. At the same time, fluctuating demand and rising supply present a bottleneck for those who are expecting oil prices to keep climbing. Reduction of the size of output cuts to 7.7million barrels a day from August, by the group of 23 oil-producing countries which is led by Saudi Arabia and Russia would add about 2 million barrels to the daily oil production levels. Most of the extra OPEC+ crude would not reach the global market. These extra cuts would be used to service internal demand for electricity to run air conditioners as a result of the scorching temperatures across the Arabian Peninsula. Fewer citizens have been travelling to Europe to avoid the scorching temperatures.

Rising supply is not the only thing that will put pressure on crude prices. The anticipation for recovery in demand for oil is also running into problems. At a period when crude prices were at the lowest point in April, China made a record purchasing splurge and subsequently, China’s oil buying decreased. The amount of oil kept in Shandong province haulers and refineries has risen by 28% since mid-May and close to hitting a five-month high. However, there is still an enormous pile-up of vessels that are waiting off the seashores to offload their freights. Some of them have been there for two months.

READ ALSO: What banks might do to avoid getting crushed by Oil & Gas Loans

Temporarily, China’s independent refineries started to decrease their processing rate from record levels in mid-June and massive glut across the country may reduce its demand for gasoline and oil by almost 5%, whilst the decline should be temporary.

Vacation States, like Florida and California, are seeing a rise in COVID-19 cases, with a record number of daily infections and increased death tolls. This has caused travel restrictions and also, ruining demand for both gasoline and jet fuel. The recovery in US gasoline demand stalled shortly after the driving summer season got underway. Crude is being squeezed between rising supply and a stagnating demand recovery, which is going to make the oil bulls uncomfortable. It is plausible supply could overload storage facilities, pipelines and refineries, creating little room for domestic production of oil.

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READ ALSO: Gold loses $70 dollars in an hour after reaching $2,000

In the past few months, Saudi Arabia, Russia and most OPEC members complied to slashing production. On the other hand, American oil companies are decommissioning rigs and shutting Wells. These developments helped push oil prices remarkably. Oil prices may fall again if there is another surge in Coronavirus cases and death as governments begin allowing businesses to reopen and people might see that as carte blanche to move about more freely.

The US oil companies have started producing oil from the wells they abandoned when the prices sank, after the restoration of wells that were shut earlier this year. There are chances that prices could also fall when haulers filled with more than 50million barrels of crude oil from Saudi Arabia, reach the US in July ending. US oil companies have increased production by 1.2million barrels a day in the past six weeks. Output went as low as 9.7million barrels a day in the second week of June but has risen to 10.9million barrels a day as activity begin to recuperate in the big shale fields on Texas. US production will now balance at about 11million barrels a day through to the end of 2020 which is well below the 13million barrels a day in March before the Saudi-Russian price war and Coronavirus pandemic devastated the US oil prices.

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Commodities

Crude oil prices record gains, as Iraq pledges to curb crude oil production

Oil markets traded softer into the weekend on the back of escalating US-China tensions.

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CRUDE OIL, 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 soared higher on the first trading session of the week. This is as Iraq, a leading OPEC member, disclosed that it would reduce its oil production. More so, U.S. President Donald Trump has taken executive action on the provision of economic aid to Americans hit by the COVID-19 pandemic, thereby reigniting hopes among crude oil traders for a recovery in energy demand.

The West Texas Intermediate gained 1.26% to $41.71. Brent Crude was also up 0.95% to $44.82 at the time this report was drafted.

Iraq, the second-largest OPEC member (in terms of production capacity) disclosed that it would increase its production cuts to compensate for failing to comply with a deal earlier made in April 2020 to curb crude oil production.

READ MORE: Comparing the 2016 oil price crash to 2020 oil price crash

Insight: In an explanatory note to Nairametrics, Stephen Innes, the Chief Global Market Strategist at AxiCorp, spoke about the macros that crude oil is presently focused on. He said:

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“Oil remains in a relatively tight trading range with upside capped by concerns about the pace of the post-COVID-19 macro recovery and rising OPEC+ and US supply.

“Oil markets traded softer into the weekend on the back of escalating US-China tensions. Although prices bounced favorably on the US employment data, they were unable to hold on to their gains given the geopolitical overhang.”

READ MORE: World’s largest oil company to pay $75 billion annual dividend, despite plunge in profits

Still, crude oil markets continue to test the upper bound of its recent trading range, supported by OPEC’s unwavering compliance commitment which was reaffirmed when Saudi Arabia and Iraq’s energy ministers made a joint statement saying that they were fully committed to the OPEC+ oil production agreement.

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Commodities

Five oil majors reduce value of their assets by $50 billion in Q2

Energy demand at one point was down by more than 30% globally.

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Five oil majors reduce value of their assets by $50 billion in Q2

Five oil majors (including Exxon Mobil and British Petroleum) reduced the value of their assets by $50 billion in Q2, 2020. They also reduced their production rates as the COVID-19 pandemic caused a downward trend in energy demand.

What this means: The cut in asset valuations and reduction in crude oil production by these oil majors showed the depth of damage the COVID-19 pandemic caused on the global energy sector in Q2, 2020.

Energy demand at one point was down by more than 30% globally and still remains below pre-pandemic levels.

READ MORE: Respite for Nigeria as Exxon Mobil and Shell lose $1.8 billion arbitration award  

Some of these conpanies’ executives said they took these austerity measures because they expect demand to continue to be on the downward trend in the meantime. This is in view of the fact that people around the world are traveling less, even as many global industries are not in full capacity. The pandemic has already killed more than 700,000 people.

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Of those five oil majors, only Exxon Mobil (XOM.N) did not book sizeable impairments, Reuters reported. However, an ongoing re-evaluation of Exxon Mobil plans could lead to a reasonable amount of its assets being impaired, and signal the removal of 20% or 4.4 billion barrels of its oil and gas reserves.

READ ALSO: Oil prices drop to 21-year low as demand and storage crises persist

Oil major BP (BP.L) took a $17 billion hot. It said its plans in the coming years would be a focus on renewables and fewer fossils.

About two weeks ago, Nairametrics reported how Exxon Mobil and Chevron posted their worst losses in modern history, as the COVID-19 pandemic and a glut in crude oil reduced the demand for energy products in the second quarter of 2020.

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