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Commodities

What next for Oil amid rising COVID-19 cases?

The market is feeling pressure amid rising COVID-19 cases in the United States and Europe, and also due to Libyan oil production.

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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

Crude futures fell 1.9% in New York on Friday and posted their first weekly decline in three, according to Bloomberg. Libya lifted force majeure on its Ras Lanuf and Es Sider ports and oil output will surpass 1 million barrels a day in four weeks, according to the state-run National Oil Corp. A further increment in Libyan oil production will lead to more supply to an oversupplied market that is wrestling with a pandemic-induced sales decline.

This declaration comes in the wake of the ongoing tussles in the North African region, which marked a lasting truce arrangement.

READ: OPEC+ to reduce production cuts in August to 7.7 million barrels a day

Finance Minister, Faraj Boumtari, told Al-Jazeera that in recent years, the regular oil barricades in Libya have cost the nation a sum of US$130 billion in lost incomes.

The truce in Libya is just going to empower more production there and keep it consistent for some time, as the COVID-19 circumstance is not generally improving. Libya’s oil industry has been tormented by battles, as opponent groups have been battling for authority over zones in Libya and its oil terminals and ports since the overturning of Muammar Gaddafi in 2011.

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READ: Libya’s output could destabilise OPEC’s cuts and affect crude prices

In other news, Russia downplayed the likelihood that OPEC+ could expand its present 7.7 million barrels everyday production cuts in one year from now, as per Russian President Vladimir Putin. The remarks could be only jawboning to a market that is urgently looking for consolations that oil production will not increase excessively. However, Russia has in the past been hesitant to keep up its part of the oil production cuts; So, any notice that it is contemplating a slower tightening of the cuts is critical.

Russia had neglected to cut its own oil production to the level it consented to in 2019 and mid-2020. Given how oil production in the United States bounced back two weeks ago, however, it was still down from its March 13 high of 13.1 million bpd. U.S. oil production presently sits at 10.5 million bpd – 2.6 million bpd under those March highs, as indicated by the Energy Information Administration –

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READ: 4 key reasons why Brent crude might slip back to $35 per barrel

China has assumed a critical function in supporting global oil demand as of late, by bringing in its most volumes since May. In contrast, there is a slow recovery in the remainder of Asia and poor refining margins. But how long would China be able to help the fragile global oil market, when demand outside China is weak, with the second wave of COVID-19 contaminations wrecking world economies.

In recent months, China’s unrefined petroleum imports have not fallen under 11 million barrels per day (bpd), with June orders of 12.9 million bpd crushing the past record from May by more than 1.5 million bpd. The market is feeling pressure amid rising COVID-19 cases in the United States and Europe, and also due to Libyan oil production.

READ: Oil supply feared to drop by 3%, as new cases of COVID-19 infections increase

A few U.S. states detailed daily record increments in COVID-19 infections on Thursday, raising worries about future gasoline interest, while France extended curfews as the second wave of the pandemic compasses across Europe.  Oil prices rose last week when the House Speaker, Nancy Pelosi, spoke about the possibility of a stimulus package.

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Dapo-Thomas Opeoluwa is a Global Markets analyst and an Energy trader. He is currently an MSc. Student in International Business, Banking and Finance at the University of Dundee and holds a B.Sc in Economics from Redeemers University. As an Oil Analyst at Nairametrics, he focuses mostly on the energy sector, fundamentals for oil prices and analysis behind every market move. Opeoluwa is also experienced in the areas of politics, business consultancy, and the financial marketplace. You may contact him via his email- [email protected]

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Commodities

Oil prices heading for 5th week of gains, near $50 per barrel

Brent crude futures gained over 1%, as it was within striking distance of hitting the $50/barrel price mark after gaining around 1% on Thursday.

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Crude oil prices slump, as partial lockdowns resume

Crude oil prices are rallying higher at the last trading session of the week, headed for the fifth week of gains.

OPEC+ members agreed to continue limiting crude oil production to cope with the COVID-19-hit demand, but the compromise agreed on wasn’t what oil traders had really hoped for.

READ: Ripple gains over 171% last month

  • At the time of writing this article, Brent crude futures gained over 1%, as it was within striking distance of hitting the $50/barrel price mark after gaining around 1% on Thursday.
  • West Texas Intermediate futures were also surging by over 1% trading around $46/barrel.
  • OPEC+, the popular alliance that includes OPEC members, Russia, and other leading oil producers, agreed yesterday to ease deep oil output cuts from January by producing half a million barrels per day, but still failed to reach a compromise on a broader policy for the rest of 2021.
  • Oil traders had earlier anticipated that the popularly known oil cartel group would roll over oil cuts of 7.7 million barrels per day or about 8% of global oil production, at least until the end of Q1 2021.

READ: Saudi Arabia is OPEC’s bull, as oil price tops $70 for the first time in 5 months

What they are saying

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, gave vital insights on the outcome of the all-important meeting, and the high expectations of significant price volatility at the crude oil market:

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“All eyes were on the OPEC+ meeting overnight, where oil ministers ended up meeting at the halfway house and sharing a glass half full in a typical OPEC + fudgy. They came up with the ultimate compromise as the producer’s group agreed to taper production increases.

READ: Naira devalued, now N390/$1 as black market (wired) hits N503/$1

“They will start with 500k barrels from January and hold monthly meetings to review prices and decide on output policies. These meetings will bring some volatility to the market and, importantly, stand to make hedging harder for US producers.

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“One interesting but not so cohesive front was Saudi Arabia and Russia usually chair the meeting; only Russia did the honours this time. Some see this as a clear sign of the conflicts within the organization.”

READ: Presidency questions how many Nigerians have cars, generators, defends fuel price hike

What to expect

Looking at the recent price action, Nairametrics is of the opinion that the futuristic price movements of oil prices would largely depend on the degree to which OPEC+ cohesion remains intact.

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

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Commodities

Oil prices slump, OPEC+ meets today

Brent crude futures prices were down by 0.3%, trading at $48.10/barrel after initially gaining 1.8%.

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OPEC+ 2, Oil production drops, as Nigeria complies with OPEC+ output cuts  

Crude oil prices were trading lower at the fourth trading session of the week, as major oil producers including Saudi Arabia and Russia are set to meet on oil production cuts extension set in place in the first wave of the COVID-19 onslaughts.

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

  • At the timing of writing this report, Brent crude futures prices were down by 0.3%, trading at $48.10/barrel after gaining 1.8% yesterday.
  • U.S. based oil contract, West Texas Intermediate futures, traded at $45.11/barrel, having ended 1.6% higher at Wednesday trading session.
  • OPEC+ are resuming talks in discussing policies for next year after earlier talks produced no agreement on how to tackle soft energy demand amid a new COVID-19 wave.
  • Oil traders anticipate that the popularly known oil cartel group will roll over oil cuts of 7.7 million barrels per day or about 8% of global oil production, at least until the end of Q1 2021.
  • But after hopes coming from three promising COVID-19 vaccines set for the market triggered a rally in oil prices at the end of last month, some major oil stakeholders recently questioned if such prevailing cuts are still needed

READ: Crude oil prices rally as investors remain optimistic about oil production cut

What they are saying

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, gave vital insights on leading fundamentals weighing on oil prices including the expected outcome from the all-important meeting scheduled to hold today,

“I expect oil to be whippy but confined to current ranges, until OPEC+ signals the all-clear for traders to shift oil prices back to recent highs.

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READ: Nigeria’s 5,000 BPD refinery will produce 271 million liters of petrol every year

“Reports were hitting the streets of unnamed OPEC+ delegates saying that progress is being made on talks about production cuts. That, combined with the surprise US inventory draw today, has triggered a move up in oil.

“Discussions will continue in earnest and I think given what is at stake, the base case should be that OPEC+ agrees to an extension of cuts. There are clear tensions within OPEC that may undermine market confidence in the OPEC+ deal from now on.

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“It will be more important than ever for OPEC+ to present a unified front, while waiting for demand to recover when the vaccine becomes widely distributed.”

READ: OPEC crude oil production drops to its lowest in nearly 30 years

READ: Crude oil prices up 12% in barely 4 days, triggered by OPEC+ proposed cuts

What to expect

Any sign that OPEC+ is struggling to reach an agreement could weigh down on oil prices, at least in the near term.

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Commodities

Gold prices drop amid COVID-19 vaccine optimism

Gold futures prices dropped 0.32% at $1,813/ounce, though it’s now trading above the $1,800 mark.

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Gold Up as U.S. hits Record Number of COVID-19 Cases, Gold stands firm above $1,800 over increasing virus fears and weaker dollar , Gold stands firm above $1,800 over increasing virus fears and weaker dollar, Gold prices surge higher, Traders focus on U.S. Federal Reserve

Gold prices drifted lower in Wednesday’s trading session.

The plunge in the precious metal price is coming on growing optimism over U.S. talks for the latest stimulus deal and a COVID-19 vaccine hitting the market very soon saw a retreat from the safe-haven yellow metal.

  • At the time of writing this report, Gold futures prices dropped 0.32% at $1,813/ounce, though it’s now trading above the $1,800 mark after it recorded impressive gains on Tuesday as the U.S dollar retreated, yet gold bulls still face uphill challenges from the COVID-19 vaccine optimism prevailing among global investors.

READ: Nigerian billionaire, Benedict Peters Plans to mine Platinium in Zimbabwe

Global investors are primarily reducing their bullish bias, taking into consideration the most recent testimony from U.S Treasury Secretary, Steve Mnuchin, and US Federal Reserve Chairman, Jerome Powell, on Monday to the Senate Banking Committee.

Though both hinted that the world’s largest economy was on the path to recovery, they emphasized the need for a lifeline.

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READ: U.S dollar set for weekly losses, currency traders buy Euro, British Pound

What you should know

In an explanatory note to Nairametrics, Stephen Innes, Chief Global Market Strategist at Axi, spoke on why the yellow metal could face more selling pressure in the coming weeks, taking into consideration, market sentiments that the future looks bright:

“Gold had been trading well below USD1,800/oz and came close to testing the psychological make or break for ETF concerns USD1,750/oz level. Flashing green lights at the end of the tunnel suggest investors should look through the immediate concerns and focus on the future, which seems incredibly bright and bullish.

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“So, with month-end selling pressure mostly out of the way, it could allow investors to focus on those flashing green sectoral lights at the end of the Covid-19 tunnel.”

READ: Germany’s biggest bank says more people now prefer Bitcoin over gold

What to expect

Although, a weaker U.S dollar effectively threw a lifeline around gold prices yesterday, helping it rally back from two weeks of declines. That said, Gold prices might resume its bearish play amid high hopes on COVID-19 vaccines.

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