WEEKLY ENERGY RECAP: US crude glut caps prices

A picture taken on July 30, 2020 shows the exterior of the Shell Pernis site in Rotterdam. (AFP)
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Updated 01 August 2020

WEEKLY ENERGY RECAP: US crude glut caps prices

Brent crude nudged up to $43.40 per barrel after another steady week. Interestingly, Brent crude rose as futures weakened. That indicates abundant quantities of physical oil or an increased difficulty in placing barrels.

The US WTI oil benchmark took a different direction to Brent, falling to $40.27 per barrel. That may have been triggered by the historically large drop in US second-quarter gross domestic product.

WTI retreated despite US commercial crude stocks falling by 10.61 million barrels, which is the largest draw since the 11.5 million-barrel fall reported for the end of December 2019. 

This brings US inventories to a 14-week low amid rising crude oil exports that climbed to 3.21 million barrels per day (bpd). The drop in spare oil was also linked to rising consumption by refineries, which at 14.6 million bpd is the strongest since March.

Still, according to Energy Information Administration data, US crude inventories remain nearly 18 percent above the five-year average for this time of year.

The fact that US crude storage draws came amid persistently lower crude imports and higher crude exports, should have normally moved the price of US crude higher. 

Instead, it moved lower, despite the weakening of the US dollar. This may be telling the market that oil prices cannot move much higher until the huge storage glut is absorbed.

As oil prices remain steady for the third month in a row, the forward futures curve has weakened, creating a situation where increased production is favored even as refining demand recovered. This is clearly reflected in the WTI futures price curve. Rising coronavirus infections in some US states continue to weigh on market sentiment.

Rising oil demand in Asia could also be capped by a second wave of the virus. Notwithstanding such concerns, gasoline demand has improved to pre-pandemic levels in many countries.

The competition between these two forces of recovery and remission in the global spread of the virus will determine where the oil price settles in the months ahead.

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• Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq


Britain expects ‘very significant’ week for Brexit talks as clock ticks down

Updated 29 November 2020

Britain expects ‘very significant’ week for Brexit talks as clock ticks down

  • Despite missing several self-imposed deadlines, the negotiations have failed to bridge differences on competition policy and the distribution of fishing rights
  • Britain’s transitional EU exit agreement expires on Dec. 31, and Britain says it will not seek any extension

LONDON: Britain and the European Union are heading into a “very significant” week, British foreign minister Dominic Raab said on Sunday, as talks over a trade deal enter their final days with serious differences yet to be resolved.
EU negotiator Michel Barnier told reporters in London that “works continue, even on Sunday” on his way to a negotiating session, as both sides look for a deal to prevent disruption to almost $1 trillion of trade at the end of December.
“This is a very significant week, the last real major week, subject to any further postponement... we’re down to really two basic issues,” Raab told the BBC.
Despite missing several self-imposed deadlines, the negotiations have failed to bridge differences on competition policy and the distribution of fishing rights.
But Britain’s transitional EU exit agreement — during which the bloc’s rules continue to apply — expires on Dec. 31, and Britain says it will not seek any extension. A deal would have to be ratified by both sides, leaving little time for new delay.
“The bottom line is... in the ordinary course of things we need to get a deal done over the next week or maybe another couple of days beyond that,” Raab told Times Radio in a separate interview.
Earlier, he had signalled some progress on the ‘level playing field’ provisions which look to ensure fair competition between Britain and the EU, and said fishing remained the most difficult issue to solve.
Despite accounting for 0.1% of the British economy, fishing rights have become a totemic issue for both sides. Britain has so far rejected EU proposals and remains adamant that as an independent nation it must have full control of its waters.
“The EU have just got to recognize the point of principle here,” Raab told Times Radio.