IEA warnings of 'fragile' oil market amid pandemic
Oil climbed Thursday after Saudi Arabia showed its determination to stop OPEC+ members exceeding their production quotas.
Futures in New York surged as much as 2.1 per cent after trading in negative territory for most of the session. During the OPEC+ Joint Ministerial Monitoring Committee meeting, Saudi Arabia’s Prince Abdulaziz bin Salman forcefully condemned cartel members that have cheated on production quotas by pumping too much crude.
The United Arab Emirates signaled that it would make up for pumping too much oil in the past two months. Still, Iraq is exporting more crude so far in September than its daily average in August.
“You have the two most powerful members of the technical committee giving this narrative,” said Bart Melek, head of global commodity strategy at TD Securities. “There is a good set of assumptions to be made that there is pressure being applied on those who may not be fully compliant.”
As most Americans are forced to remain at home moving into fall, this summer’s steady rebound in gasoline demand has stalled out with the end of the driving season. Meanwhile, a vital profit metric for oil refiners in Europe shows refineries are making next to nothing from diesel, which could ultimately lessen how much crude the plants process and drag on the price of oil.
The outlook out of OPEC+ isn’t much brighter, with the group seeing risk to oil demand from a second wave of the Covid-19 pandemic, according to a draft communique after its JMMC meeting.
- West Texas Intermediate for October delivery rose 73 cents to US$40.89 a barrel as of 10:49 a.m. in New York
- Brent for November settlement advanced 82 cents to US$43.04 a barrel
- As the recovery in demand continues, shipping analysts cut their estimates for all oil tanker earnings for third and fourth quarters, as well as for all of 2020, according to a Bloomberg survey of shipping analysts.
- Physical markets for actual barrels of crude are showing signs of weakness, with Bakken crude for delivery at Clearbrook, Minnesota, trading in recent sessions at its largest discount to Nymex oil futures in roughly a week. Poseidon crude erased its premium against Nymex WTI futures, trading at its weakest level in about two months.
Other oil-market news:
- India’s gasoline consumption bounced back for the first time in six months as easing of lockdown rules prompted locals to use personal vehicles to avoid surging infections.
- The oil market has a diesel problem and it’s not letting up. While crude stockpiles in the U.S. are sitting at the lowest since April, supplies of distillates, which include diesel, heating oil and jet fuel, are continuing to swell and skyrocketed to the highest level for this time of year in U.S. government data going back to at least 1991.
- South Africa’s Strategic Fuel Fund reached an “in principle” agreement with Glencore to reverse a 2015 sale of strategic oil reserves, the state-owned SFF said Thursday in a statement.
--With assistance from James Thornhill and Sharon Cho