Oil prices declined on Monday during the Asian trading session amid rising concerns that the surge in coronavirus in India and other nations could force regulators to enforce stronger measures at curbing its spread and eventually affect economic activity and drag on demand for commodities like crude oil.
Brent crude oil, against which Nigerian oil is priced, declined by 22 cents or 0.33 percent to $66.55 per barrel at 8:19 am Nigerian time on Monday, following a 6 percent surge last week.
The US West Texas Intermediate (WTI) declined by 18 cents or 0.29 percent to $62.95 per barrel, after it gained 6.4 percent last week.
The decline was after India reported 261,500 new coronavirus infections on Sunday, taking the country’s total cases to almost 14.8 million, second to only the United States that has reported over 31 million coronavirus infections.
“With … a resurgence of virus cases in India and Japan, topside ambitions continue to run into walls of profit-taking,” said Stephen Innes, chief market strategist at Axi.
Businesses in Japan believed the world’s third-largest economy will experience a fourth round of coronavirus infections, with many bracing for an additional slow down in economic activity.
While Japan has had fewer COVID-19 cases when compared with other major economies, concerns about a new wave of infections are fast rising, according to responses in Reuters poll.
On Tuesday, April 20, 2020, Hong Kong will suspend all from India, Pakistan and the Philippines because of imported coronavirus infections, authorities stated in a statement released on Sunday.
India’s COVID-19 death rose by a record 1,501 to hit 177,150.
OPEC Expects Increase In Global Oil Demand Raises Members’ Forecast on Crude Supply
The Organisation of Petroleum Exporting Countries (OPEC) yesterday lifted its forecast on its members’ crude this year by over 200,000 bpd and now expects demand for its own crude to average 27.65mn bpd in 2021.
This is almost 5.2mn bpd higher than last year and around 2.7mn b/d higher than an earlier estimate of the group’s April production.
According to the highlights of the organisation’s latest Monthly Oil Market Report (MOMR), OPEC crude is projected to rise from 26.48 million bpd in the second quarter to 28.7 million bpd in the third and 29.54 million bpd in the fourth quarter of the year.
The report also indicated a fall in Nigeria’s crude production from 1.477 bpd in February to 1.473, a difference of just about 4,000 bpd before rising again in April to 1.548 million bpd, to add 75,000 bpd last month.
OPEC stated that its upward revision of members’ crude was underpinned by a downgrade in the group’s forecast for non-OPEC supply, which it now expects to grow by 700,000 bpd to 63.6mn b/d against last month’s report’s projection of a 930,000 bpd rise to 63.83mn bpd.
The oil cartel projected that US crude output would drop by 280,000 bpd this year, compared with its previous forecast for a 70,000 bpd decline.
On the demand side, OPEC kept its overall forecast unchanged from last month’s MOMR, stressing that it expects global oil demand to grow by 5.95 million bpd to 96.46 million bpd this year, partly reversing last year’s 9.48mn bpd drop.
Spot crude prices fell in April for the first time in six months, with North Sea Dated and WTI easing month-on-month by 1.7 percent and 1 percent, respectively.
On the global economic projections, the cartel said stimulus measures in the US and accelerating recovery in Asian economies might continue supporting the global economic growth forecast for 2021, now revised up by 0.1 percent to reach 5.5 percent year-on-year.
This comes after a 3.5 percent year-on-year contraction estimated for the global economy in 2020.
However, global economic growth for 2021 remains clouded by uncertainties including, but not limited to the spread of COVID-19 variants and the speed of the global vaccine rollout, OPEC stated.
“World oil demand is assumed to have dropped by 9.5 mb/d in 2020, unchanged from last month’s assessment, now estimated to have reached 90.5 mb/d for the year. For 2021, world oil demand is expected to increase by 6.0 mb/d, unchanged from last month’s estimate, to average 96.5 mb/d,” it said.
The report listed the main drivers for supply growth in 2021 to be Canada, Brazil, China, and Norway, while US liquid supply is expected to decline by 0.1 mb/d year-on-year.
Oil Rises Over Concerns of Fuel Shortages
Oil prices rose on Tuesday, as lingering fears of gasoline shortages due to the outage at the largest U.S. fuel pipeline system after a cyber attack brought futures back from an early drop of more than 1%.
Benchmark gasoline futures prices rose 1 cent to $2.14 a gallon.
On Monday, Colonial Pipeline, which transports more than 2.5 million barrels per day (bpd) of gasoline, diesel and jet fuel, said it was working to restore much of its operations by the end of the week.
“Right now there’s a generalized anxiety premium being built into prices because of Colonial and it’s keeping a floor under the market,” said John Kilduff, partner at Again Capital LLC in New York.
Fuel supply disruption has driven gasoline prices at the pump to multi-year highs and demand has spiked in some areas served by the pipeline as motorists fill their tanks.
Traders booked at least four tankers to store refined oil products off the U.S. Gulf Coast refining hub after a cyber attack that knocked out the pipeline, shipping data showed on Tuesday.
North Carolina, the U.S. Environmental Protection Agency and Department of Transportation issued waivers allowing fuel distributors and truck drivers to take steps to try to prevent gasoline shortages.
OPEC on Tuesday raised its forecast for demand for its crude by 200,000 bpd and stuck to its prediction of a strong recovery in global oil demand this year as growth in China and the United States counters the coronavirus crisis in India.
Meanwhile, the rapid spread of infections in India has increased calls to lock down the world’s second-most populous country and the third-largest oil importer and consumer.
India’s top state oil refiners have already started reducing runs and crude imports as the new coronavirus cuts fuel consumption, company officials told Reuters on Tuesday.
On the bullish side for crude, analysts are expecting data to show U.S. inventories fell by about 2.3 million barrels in the week to May 7 after a drop of 8 million barrels the previous week, a Reuters poll showed.
Gasoline stocks are expected to have fallen by about 400,000 barrels, analysts estimated ahead of reports from the American Petroleum Institute on Tuesday and the U.S. Energy Information Administration on Wednesday.
A Threat to Revenue As Nigeria’s Largest Importer of Crude, India slash Imports By $39.5B
Nigeria’s revenue earning capacity has come under threat following the reduction of importation of crude oil by India.
India, Nigeria’s largest crude oil importer, reduced crude oil imports by $39.5bn in April, compared to the same time the previous year, data from India’s Petroleum Planning & Analysis Cell showed.
According to the Indian High Commission in Nigeria, India’s crude oil imports from Nigeria in 2020 amounted to $10.03bn.
This represented 17 percent of Nigeria’s total crude exports for the year according to the Nigerian National Petroleum Corporation, as quoted by OilPrice.com.
As Nigeria’s largest importer of crude oil, lockdowns in India’s major cities from the COVID-19 surge in April had ripple effects on Nigeria’s oil sales.
The NNPC was prompted to drop the official standard price of its main export streams, Bonny Light, Brass River, Erha, and Qua Iboe, by 61-62 cents per barrel below its April 2021 prices. They traded at $0.9, $0.8, $0.65, $0.97 per barrel respectively, below dated Brent, the international benchmark, as Oilprice.com showed.
India had been buying the not-too-light and not-too-heavy Nigerian crudes that suited its refiners.
Reuters reported that the Indian Oil Corporation’s owned refineries were operating at 95 percent capacity in April, down from 100 percent at the same time the previous month.
An official at the IOC was quoted as saying, “If cases continue to rise and curbs are intensified, we may see cuts in refinery runs and lower demand after a month.” Hundreds of seafarers risked being stuck at sea beyond the expiry of their contracts, a large independent crude ship owner reportedly told Bloomberg.
India reportedly bought more American and Canadian oil at the expense of Africa and the Middle East, reducing purchases from members of the Organisation of the Petroleum Exporting Countries to around 2.86 million barrels per day.
This squeezed the group’s share of imports to 72 percent from around 80 percent previously, as India’s refiners were diversifying purchases to boost margins, according to Reuters.
India also plans to increase local crude oil production and reduce import expenses as its population swells, according to Bloomberg.
A deregulation plan by the Narendra Modi-led government to boost national production to 40 million tonnes of crude oil by 2023/2024, an increase of almost eight million tonnes, had already been initiated.
According to Business Today, an Indian paper, the country currently imports 82 percent of its oil needs, which amounted to $87bn in 2019.
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