Crude Oil Prices Rise amid Gradual Relaxation of Restrictions, Cut in Global Supply

Must Read

List of Access Bank Sort Codes & Branches (with addresses) in Nigeria

The sort code is a number which usually identifies both the bank and the branch where an account is...

Here is the list of Providus Bank Branches in Lagos

A little over two years after it was granted a commercial banking license with regional authorization by the Central...

List of Guaranty Trust Bank Sort Codes & Branches (with addresses) in Nigeria

The sort code is a number that usually identifies both the bank and the branch where an account is...
In the just concluded week, crude oil prices increased given the commitments made by the Organisation of the Petroleum Exporting Countries (OPEC) and their allies to cut crude oil supply by 9.7 million barrels per day through the end of June 2020, from May 1, 2020; the production declines in non-OPEC countries; and as governments across the globe began subtle easing of lockdown in their countries.
Specifically, Nigeria’s sweet crude variant, bonny light, rocketed by 79.80% to USD34.09 on Wednesday, May 20, 2020, from USD18.96 it printed on Thursday, April 30, 2020. Also, the crude price of the OPEC basket jumped month-to-date by 72.09% in May 2020.
On the supply side, the strong adherence to output cut pledges by OPEC+ and the declining production in non-OPEC countries, have helped to stem the increased crude oil production, that has failed to attract buyers due to the negative impact of COVID-19 pandemic on countries’ economic activities, especially in the United States. U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) fell wo-w by 0.94% to 526.5 million barrels.
Also, the International Energy Agency (IEA) said that massive cuts have been coming in faster than it expected from countries outside the OPEC+ agreement. It noted that output from this group moderated by 3 million barrels per day (MB/d) in April 2020, than what is printed at the beginning of the year; and the drop in volume could further increase to 4mb/d in June. This, Coupled with full compliance by OPEC+ to their agreed 9.7 MB/d supply cut, the Agency expected a reduction in global crude oil supply cut to reach 12 mb/d, month-on-month, in May 2020.
Similarly, OPEC revised the non-OPEC oil supply cut downwards by 3.5 mb/d to average 61.5 Mb/d in its May 2020 edition of OPEC Monthly Oil Market Report. According to the report, the revision was based on production curtailment plans announced by oil companies, especially in North America.
To further rebalance the oil market demand and supply, on Tuesday, May 12, 2020, Saudi Arabia, the UAE and Kuwait announced that they would voluntarily depress oil output adjustments from June, by 1 MB/d, 100 thousand barrels per day (tb/d) and 80 tb/d respectively.
In addition to the expected massive reduction in global supply, on the demand side, the gradual relaxation of restrictions in some countries also supported the recent increase in crude oil prices.
Particularly, demand glimmered in the world’s largest crude oil consumer, the United States, where Crude Oil Input to Refineries rose week-on-week by 0.89% to 12.76 MB/d as at May 15, 2020, while Refinery Capacity Utilization ticked higher to 69.4% from 68.9% in the preceding week.
According to IEA’s report, the number of people living under some form of confinement at the end of May 2020 would drop to about 2.8 billion, from its recent estimate of 4 billion people. Meanwhile, Nigeria’s crude oil supply to the international market averaged at 1.8 MB/d for the first four months in 2020.
We expect Nigeria to benefit largely from the significant increase in crude oil prices given that the larger part of the country’s revenue and foreign earnings are derived from the sale of crude oil; although, the benefit is still subject to the eventual sale of the crude as the supply of crude oil still outweighs the demand at the international market.
Meanwhile, we note that the gradual recovery in crude oil prices is fragile as the strong market reaction to economic activity might be too early, given that the major uncertainties still remain. The big question is, will the ease in lockdown not spark a resurgence of COVID-19 outbreaks? Thus, the answer to this question, in addition to the level of compliance by the OPEC+ will determine the sustainability of the rise in crude prices. However, with the recent positive news on potent vaccine in US, we feel the end to the pandemic may be near.
Cowry Research
- Advertisement -
Crude Oil Prices Rise amid Gradual Relaxation of Restrictions, Cut in Global SupplyCrude Oil Prices Rise amid Gradual Relaxation of Restrictions, Cut in Global Supply

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Crude Oil Prices Rise amid Gradual Relaxation of Restrictions, Cut in Global SupplyCrude Oil Prices Rise amid Gradual Relaxation of Restrictions, Cut in Global Supply

Latest News

Reasons Behind the Success of Three of Gaming’s Biggest Brands

The gaming industry is huge. In 2019, gamers spent $152.1 billion on buying titles and paying for in-game items....

Dangote Sugar acquires Savannah Sugar for Market Expansion

In a bid to enhance production capacity and further increase its market share, shareholders of Dangote Sugar Refinery Plc (DSR) have given the nod...

Nigeria’s Domestic Debt Service increased by 295% in Q1 2020 – NBS

Domestic debt service increased by 295% from Q4 2019 to ₦609 billion in Q1 2020. FGN bonds made up 80% of the domestic debt...

PZ Cussons delists from GSE to improve business operations

The Ghana Stock Exchange (GSE) has approved the delisting of a major consumer goods company, PZ Cussons Ghana from the stock market, following the...

The power of women in the 21st Century: The Zinox Group example By Dr. Abiona Iwajowa

"There's something so special about a woman who dominates in a man's world. It takes a certain grace, strength, intelligence, fearlessness, and the nerve...
- Advertisement -
BrandsPur Weekly Cartoons
- Advertisement -Crude Oil Prices Rise amid Gradual Relaxation of Restrictions, Cut in Global SupplyCrude Oil Prices Rise amid Gradual Relaxation of Restrictions, Cut in Global Supply