Oil prices soared on Tuesday, as some European and Asian countries along with several U.S. states began to ease coronavirus lockdown measures.
The rally extended Brent crude’s gains to six straight days, while U.S. benchmark West Texas Intermediate has now rallied for five consecutive sessions. Fuel demand worldwide was down roughly 30% in April, but demand is rising modestly due to efforts to lift travel restrictions.
International benchmark Brent crude rose $3.77, or 13.9%, to settle at $30.97 a barrel. U.S. West Texas Intermediate (WTI) crude futures gained $4.17, or 20.5%, to close at $24.56 a barrel.
Prices extended their gains in after-hours trading despite industry data showing a larger-than-forecast weekly build in U.S. crude inventories, as the report also showed a surprise large fall in gasoline stocks.
U.S. crude inventories rose 8.4 million barrels last week, data from industry group the American Petroleum Institute showed late Tuesday. Analysts forecast a build of 7.8 million barrels ahead of the government’s report on Wednesday morning.
The API also reported gasoline stocks fell 2.2 million barrels, compared with analysts’ expectations in a Reuters poll for a 43,000-barrel increase, signaling that demand was recovering.
Italy, Spain, Nigeria and India, as well as some U.S. states including Ohio, began allowing some people to go back to work and opened up construction sites, parks and libraries. Health experts, however, have warned that such moves could cause coronavirus infections to rise again.
“The market is starting to realize that demand destruction has been terrible, but we’re reopening and demand is going to get better,” said Phil Flynn, senior analyst at Price Futures Group. “But the production pullback is just beginning.”
U.S. President Donald Trump hailed measures by the states to reopen their economies.
Vehicle traffic in most of the United States, including those parts that have yet to lift shelter-in-place orders, has also rebounded, RBC Capital Markets research said in a note.
Swiss bank UBS said the easing of restrictions would help balance out supply and demand, leading to a shortfall in supply by the fourth quarter.
Morgan Stanley said the peak of oversupply in global markets had likely been reached and a storage crunch was abating.
“Inventories have built but not quite as strongly as feared: With social distancing measures ramped up in March … the observed inventory increases have not been quite as strong as feared,” it said in a note.
Saudi Arabia’s crude oil exports in May are expected to drop to about 6 million barrels per day (bpd), the lowest in almost a decade, industry sources and analysts say.
The top exporter is cutting production from May under a supply pact with the Organization of the Petroleum Exporting Countries and allies like Russia.
However, Vitol Chief Executive Russell Hardy told Reuters long-term peak demand may be permanently eroded. Global oil demand sank by 26 million to 27 million barrels per day (bpd) in April, and Hardy predicts a year-on-year drop of more than 8 million bpd.
In addition, air traffic is not expected to rebound soon, which will slow the recovery for fuel demand.
Hope Rises For Nigeria’s Underutilised Eastern Seaports
Prospects of revival of the country’s eastern seaports heightened last Thursday at the occasion of the inauguration of the new Board of the Nigerian Ports Authority (NPA) by the Minister of Transportation, Rotimi Amaechi.
Describing them as underutilised, the Chairman of the new Board, Akin Ricketts, lamented over their state, while noting that such a situation had far-reaching impact on the country’s economy, as it was responsible for the congestion which has crippled business at the western ports of Apapa and Tin Can Island; all in Lagos.
Ricketts then pledged that his new board would strive to resolve the situation by improving the conditions of the eastern ports. The eastern ports comprise Port Harcourt and Onne (Rivers State), Delta in Warri (Delta State) and Calabar (Cross River State). As envisaged, the eastern ports are to service the eastern part of the country comprising states located east of the River Niger.
For several years, the western ports have been under a state of strangulating congestion, with roads leading to them routinely clogged by unclaimed imported vehicles and assorted cargo, which in turn delay and deny onward passage of cleared cargo to their destinations for as much as six months in some cases.
This is because of the critical importance of the seaports to a Nigerian economy with preponderant dependence on imports of consumer goods, as well as industrial raw materials and equipment.
Incidentally, the problematic state of the country’s ports is not new, while the causative factors are also not far-fetched. For instance, one of the reported age-long problems of the eastern ports is that of narrow and shallow channels connecting them to the ocean, with associated high cost of dredging, as well as clearing such waterways.
Other issues that have made them less attractive to port users include the differential in freight charges when compared to western ports, and the deplorable state of infrastructure in them. Yet another is the challenge of security for maritime operations in the eastern zone.
Presently, many ship owners and operators in the eastern zone rent private vessels which are manned by armed naval personnel to escort their vessels of interest into and out of Nigerian waters. And this is usually at significant cost to the vehicle operators. Little wonder that over 60 per cent of cargo coming to Nigeria end up in the western ports, even when the importers may not be from that zone.
Meanwhile, it would be recalled that as apparent responses to the challenges of these eastern ports, the NPA in 2018 announced that it planned to invest N1bn to tackle the problem of reviving the eastern ports. Also, in 2019, the NPA announced a reduction of 10 per cent in port operational charges for use of the eastern ports by categories of ships, namely those with 250 of 20-foot equivalent containers, general cargo of 16,000 metric tonnes, combo vessels of 16,000 metric tonnes, as well as roll-on roll-off vessels with 250 units of vehicles.
It would seem that such measures are yet to sway the port users to step up significantly their use of these eastern ports as the affected ports still lack the operational ambience and infrastructure for trouble-free patronage by port users.
Many observers attribute the current problems of the country’s port system to the 2006 measures by the Federal Government to concession the ports and the attendant withdrawal of 30 per cennt incentive granted to vehicle owners who use the eastern ports under their control by government.
However, while the concession was to attract better business for the ports (including the eastern ports), the reverse was the case.
Hence while the concern of the chairman of the new NPA board remains valid, the onus still lies on the management of the agency to bring the eastern ports into full operational status.
Source: Daily Trust
IPMAN disagrees with FG over new petrol pump price
The Oil marketers in Nigeria on Tuesday said it was impossible for its members to sell petrol at the new government regulated N121.5 per litre.
Acting under the aegis of Independent Petroleum Marketers Association of Nigeria (IPMAN), the marketers said they have directed their members to sell petrol at N123.5 per litre.
Reacting to the new price announced by the Petroleum Pricing Regulatory Agency (PPPRA), IPMAN said the agency has advised them to either sell at the new pump price or adjust to what will make Nigerians happy.
And as such, they accordingly instructed their marketers to comply with the advice of the government and adjust to N123.5 per litre pending the Deport Petroleum Marketers Association’s action on the new pump price.
The IPMAN Chairman Kano chapter, Alhaji Bashir Danmallam, in a statement in Kano, urged marketers under his jurisdiction to comply with the new price modulation advice by ensuing that no one sells above the approved N123.5 per litre.
In the circular the PPPRA, advised marketers to sell fuel not above N123.5 per litre.
After a review of the prevailing market fundamentals in May and considering marketers’ realistic operating costs, as much as practicable, we wish to advise of a new PMS guiding pump price with corresponding Ex-Depot price for the month of June, 2020, as follows: Price Band: N121. 50 — B123. 50 per litre. Ex-Depot price:N102.13–N104.13 per litre. Ex-Depot for collection:N109.78–N111. 78 per litre.
All marketers are advised to operate within the indicative prices as advised by the PPPRA,” the circular said.
Danmallam assured the public of a steady supply and distribution of petroleum products at all times and in all circumstances, praying also that God should put an end to the pandemic.
He advised both the public and marketers to continue to observe all public health measures of personal hygiene and social distancing to curtail the spread of the virus.
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