LATEST UPDATES
Card-image-cap

Economy | Oil & Gas

Towards a Comfort Zone for the Oil Price

Sep 07, 2020   •   by   •   Source: Proshare   •   eye-icon 672 views

Monday,September 07, 2020 /08:46 AM / by FBNQuest Research / HeaderImage Credit: Economic Times

 

Proshare Nigeria Pvt. Ltd.


Theweek in April when traders and shippers had to pay to be rid of their cargoesof WTI crude seems a distant memory, and the price of UK Brent in recent weekshas settled at +/- US$45/b. US storage capacity was said to be close to fullyutilized, Saudi and Russia were locked in a battle for market share, andCovid-19 was raging across Europe. The leading lights in OPEC+ are againfriends, and the Saudi energy minister claimed on 19 August, citinginternational oil agencies, that global demand for crude would be back at 97%of pre-Covid levels in Q4 2020.


The price has held despite a pick-up in OPEC output in July by 970,000b/d to 23.3mbpd and in US production by 1.2mbpd to 10.9mbpd over roughly thesame period. For OPEC the explanation was an end to voluntary cuts by Saudi andGulf allies. US output was still far short of its recent peak of 13.0mbpd.

 

We are comfortable with the current price range, and think that the nextmove is more likely to be another leg upwards. The main risk, we feel, is theimposition of second national lockdowns in large consuming nations. Our view isthat, having seen double-digit GDP contraction amid the economic carnageresulting from the first lockdowns, governments across the world will beextremely reluctant to repeat the exercise.

 

The minister of state for oil was quoted by the wires last week assaying that Nigeria was producing 1.412mbpd (excluding condensates). This wouldbe in line with its quota within aggregate cuts of 7.7mbpd through to end-year.

 

 

Average price of Bonny Light crude (US$/b)

Proshare Nigeria Pvt. Ltd.

 

Sources: CBN; FBNQuest Capital Research

 

At current price levels and together with multilateral loans (disbursedand pending), we think that the CBN can muddle through with its fx policy ofmanaging and guiding the rate. Unification is not a core battle to win. Thedanger for the CBN, the FGN and OPEC+ as a whole is that the internationalprice moves up too quickly and rescues the struggling US shale oil industry.

 

Proshare Nigeria Pvt. Ltd.


Related News

  1. Oil Prices Fall Below $43 on Demand Concerns - OIR 040920
  2. PPMC Increases Ex-depot Price of PMS to N151.56 per Litre
  3. Axens Selected for BUA Group Integrated Refinery and Petrochemical Project in Nigeria
  4. Oil Prices Could Rise to $65 - OIR 010920
  5. Oil Prices Fall As Hurricane Fears Subside - OIR 280820
  6. Nigeria Prepares for an Extended Period of Low Oil Prices
  7. Gulf Of Mexico Storms Push Oil Prices Higher - OIR 250820
  8. Oil Tumbles On Shaky Recovery Prospects - OIR 210820
  9. Petroleum Industry Bill - Is There Light At The End of The Tunnel?
  10. Bullish Sentiment Is Building In Oil Markets - OIR 180820
  11. Average Prices of PMS, AGO, HHK and Cooking Gas - July 2020
  12. Recovery in Oil Market Extends to the Third Consecutive Month

Proshare Nigeria Pvt. Ltd.

Get the App

apple-store  play-store

Connect with us


Proshare is a professional practice focused on delivering research and information services to bridge the gap between investors and markets; by delivery on credible, reliable, and timely engagements through the following areas — Impact Research, Market Intelligence, Strategic Advisory, Stakeholder Relations & Digital Media.