According to historical data from Investing.com, oil price opened at $68.92 on Monday, 17th May 2021 and eventually closed at $66.44. Oil was under heavy pressure for much of the week as optimism that a deal to lift Iranian sanctions may be within reach, sent crude oil prices lower by 8% from the recent high.
Demand increased in Europe and the US as travelling nears pre-pandemic levels and vaccinations continue to yield positive outcomes.
Increased supply from Iran has added more pressure to the market. A 2% slump in prices occurred during the week as talks of removal of sanctions on Iran filtered into the media.
Additionally, a potential supply crisis could arise if the weather condition around the Gulf of Mexico deteriorates into a cyclone. According to the U.S. National Hurricane Center (NHC), there is a 40% chance that this could happen within the next 48 hours.
“This early storm prompted traders to buy crude ahead of the weekend in anticipation of potential production shut-ins,” Phil Flynn, senior analyst at Price Futures Group in Chicago, stated.
Restoration of Colorado pipeline, Positive US-Iran talks, demand recovery in US and Europe, Storm in the Gulf of Mexico.
Will oil price continue falling as it did last week or will it recover to the $70 level? Will the market ignore Iranian talks as analysts claim Iran already had oil in the market so it should be discounted?
The range as seen below shows there is more room upside for oil prices to recover but this depends on positive demand.
At home (Nigeria)
Shell talks of divesting onshore oil stakes in Nigeria
Earlier this week, Royal Dutch Shell through their CEO, Ben van Beurden, at their Annual General Meeting, said that their onshore oil operations in Nigeria are not compatible with its strategy to become a net-zero energy business. “The balance of risks and rewards associated with our onshore portfolio is no longer compatible with our strategic ambitions,” van Beurden told shareholders, as reported by Bloomberg.
The company talked about their issues with local communities and legal tussles in the Niger Delta. The company has a history of dealing with oil theft, pipeline sabotage, and environmental pollution in the region.
No buyers for Nigerian crude
There are reports that Nigeria has been unable to sell some of its oil. Indian refineries have slowed down buying Nigeria’s oil as a result of COVID-19.
India is a large buyer of Nigeria’s Agbami, Akpo, Bonny Light and Forcados.
“Three weeks without [Indian Oil Corp.] weighs dramatically on Nigeria. IOC is the biggest Nigerian grades buyer,” a trader said.
“[IOC] skipped the last decade of June [loading window] and now seem to have skipped July 1-10 also,” said a second trader.
Furthermore, sellers of Nigeria’s crude are now seeking other buyers in Asia and Europe as India’s COVID-19 situation remains shrouded in uncertainty amid stringent regional lockdowns and sagging domestic consumption.
No fuel price increase in June
Once again, rumours of fuel price increase have been dispelled by the Honorable Minister, Timpreye Sylva. With oil prices high, fuel prices should also increase, but the Federal government has reassured Nigerians that prices won’t reflect current “market realities.”