Cargoes of West African crude oil sailing east are on track to fall in August on fierce competition, shaky demand and disruptions in Nigerian loadings that forced at least one cancelled cargo, according to Reuters.
A total of 55 cargoes for 1.685 million barrels per day (bpd) are booked to sail to Asia this month. The total is just under two per cent lower than the planned bookings in July, but is more than eight per cent lower than August last year.
Overall buying in Asia is in question as refinery margins hit five-year lows last month due to a growing excess of refined products.
Some refineries are already processing less crude oil, while others are preparing for maintenance later in the third quarter.
At the same time, nearly all crude oil sellers are targeting Asia. Imports of Iranian crude oil from China, India, Japan and South Korea increased markedly in June, the latest month of data available, as Iran’s efforts to regain market share lost during years of sanctions paid off. As a result, some West African oil has been edged out. The biggest difference from a year earlier was in bookings for India, due in part to the unpredictability of Nigerian oil loadings.
Meanwhile, a Bloomberg survey has shown that crude oil output from members of the Organisation of Petroleum Exporting Countries (OPEC) was disrupted in July by militant attacks in Nigeria and political disputes in Libya.
Output from the 13 established members of the OPEC, excluding new entrant Gabon, fell by 80,000 barrels a day last month, a Bloomberg survey of analysts, oil companies and ship-tracking data showed.
Nigeria led the decline with a 70,000-barrel-a-day monthly drop to 1.52 million, while Libya and Saudi Arabia reduced output by 20,000 and 40,000 barrels a day respectively.
Gabon joined OPEC on July 1, becoming the smallest member with average output of 210,000 barrels a day. Because the group expanded to 14 nations, total production in July actually increased to 33.24 million barrels a day from 33.11 million the prior month. Gabon initially joined the group in 1975, but ended its membership 20 years later.
Nigeria has suffered steep crude output losses this year as militant attacks targeted oil infrastructure. Production in May fell to the lowest level in more than 27 years. While output recovered in June, it fell again in July following the disruption of supplies to the Qua Iboe terminal, which shipped an average of 342,000 barrels a day last year.
Libya’s production fell by 20,000 barrels a day to 300,000 in July. The Arabian Gulf Oil Co. halted output at the Sarir field last month after a protest by oil-facility guards shut the Eastern port of Hariga, blocking exports. The Tripoli-based Government of National Accord reached a deal with guards last week to reopen Es Sider and Ras Lanuf, two of its biggest oil terminals that have been closed since 2014, although shipments have yet to resume. Output disruptions helped raise West Texas Intermediate crude.
Gold Prices Rise as Soft Dollar Supports Safe-haven Appeal
Gold prices firmed on Monday, propped up by a subdued dollar and slight retreat in the U.S. Treasury yields, with investors gearing up for a week of speeches from U.S. Federal Reserve policymakers for cues on the central bank’s rate hike path.
Spot gold was up 0.5% at $1,759.06 per ounce, as of 0400 GMT, while U.S. gold futures were up 0.4% at $1,759.00.
While the dollar index softened, the benchmark 10-year Treasury yields eased after hitting their highest since early-July. A weaker dollar offered support to gold prices, making bullion cheaper for holders of other currencies.
“Gold is still looking slightly precarious where it is right now, and it’s probably bouncing off key technical level around $1,750,” IG Market analyst Kyle Rodda said.
“Gold remains an yield story and that yield story is very much tied back to the tapering story.”
A slew of Fed officials are due to speak this week including Chairman Jerome Powell, who will testify this week before Congress on the central bank’s policy response to the pandemic.
“There’ll be a lot of questions being put to Fed speakers about what the dot plots implied last week and weather there is higher risk of heightened inflation going forward and that rate hikes could be coming in the first half of 2022,” Rodda added.
A pair of Federal Reserve policymakers said on Friday they felt the U.S. economy is already in good enough shape for the central bank to begin to withdraw support for the economy.
Gold is often considered a hedge against higher inflation, but a Fed rate hike would increase the opportunity cost of holding gold, which pays no interest.
Investors also kept a close watch on developments in debt-laden property giant China Evergrande saga as the firm missed a payment on offshore bonds last week, with further payment due this week.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, increased 0.1% to 993.52 tonnes on Friday from 992.65 tonnes in the prior session.
Silver rose 0.9% to $22.61 per ounce.
Platinum climbed 1.3% to $994.91, while palladium gained 0.7% to $1,985.32.
Brent Crude Oil Near $80 Per Barrel Amid Supply Constraints
Oil prices rose for a fifth straight day on Monday with Brent heading for $80 amid supply concerns as parts of the world sees demand pick up with the easing of pandemic conditions.
Brent crude was up $1.14 or 1.5% at $79.23 a barrel by 0208 GMT, having risen a third consecutive week through Friday. U.S. Oil added $1.11 or 1.5% to $75.09, its highest since July, after rising for a fifth straight week last week.
“Supply tightness continues to draw on inventories across all regions,” ANZ Research said in a note.
Rising gas prices as also helping drive oil higher as the liquid becomes relatively cheaper for power generation, ANZ analysts said in the note.
Caught short by the demand rebound, members of the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, have had difficulty raising output as under-investment or maintenance delays persist from the pandemic.
China’s first public sale of state oil reserves has barely acted to cap gains as PetroChina and Hengli Petrochemical bought four cargoes totalling about 4.43 million barrels.
India’s oil imports hit a three-month peak in August, rebounding from nearly one-year lows reached in July, as refiners in the second-biggest importer of crude stocked up in anticipation of higher demand.
Oil Holds Near Highest Since 2018 With Global Markets Tightening
Oil held steady near the highest close since 2018, with the global energy crunch set to increase demand for crude as stockpiles fall from the U.S. to China.
Futures in London headed for a third weekly gain. Global onshore crude stocks sank by almost 21 million barrels last week, led by China, according to data analytics firm Kayrros, while U.S. inventories are near a three-year low. The surge in natural gas prices is expected to force some consumers to switch to oil, tightening the market further ahead of the northern hemisphere winter.
China on Friday sold oil to Hengli Petrochemical Co. and a unit of PetroChina Co. in the first auction of crude from its strategic reserves said traders with the knowledge of the matter. Grades sold included Oman, Upper Zakum and Forties.
Oil has rallied recently after a period of Covid-induced demand uncertainty, with some of the world’s largest traders and banks predicting prices may climb further amid the energy crisis. Global crude consumption could rise by an additional 370,000 barrels a day if natural gas costs stay high, according to the Organization of Petroleum Exporting Countries.
“Underpinning the latest bout of price strength is a tightening supply backdrop,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd.
Various underlying oil market gauges are also pointing to a strengthening market. The key spread between Brent futures for December and a year later is near $7, the strongest since 2019. That’s a sign traders are positive about the market outlook.
At the same time, the premium options traders are paying for bearish put options is the smallest since January 2020, another indication that traders are less concerned about a pullback in prices.
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