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OPEC Chief Says Oil Market Responding Well to Record OPEC+

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May 21, 2020 OPEC chief says oil market responding well to "Chinese refiners have lost lots of money on refined oil record OPEC+ cut exports as demand in overseas markets was hit badly by the coronavirus," said Ding Xu of China-based Sublime OPEC is encouraged by a rally in oil prices and strong Info, adding that they would rather focus on the home adherence to its latest output cut, its secretary general market. said, although sources say the group has not ruled For the past two months, a complex refinery was losing out further steps to support the market. money producing gasoline as demand crashed following The Organization of the Petroleum Exporting lockdowns to curb the spread of the coronavirus. Countries, Russia and other allies, a group known as China's retail fuel prices are protected by a minimum Brent OPEC+, are cutting supply by a record 9.7 million crude price of $40 a barrel, however, and home demand barrels per day (bpd) from May 1 to offset a slump in has recovered swiftly, denting exports, said Kostantsa prices and demand caused by the coronavirus Rangelova of JBC Energy. outbreak. Expectations of lower Chinese petrol exports and optimism Oil prices have more than doubled since hitting a 21- over global demand recovery flipped Asia's refining margin year low below $16 in April. So far in May, OPEC+ to a small premium of 4 cents to Brent crude on Tuesday has cut oil exports by about 6 million bpd, according for the first time in about two months. to two companies that track the flows, suggesting a FGE's Sandy Kwa said demand would be supported by strong start in complying with the deal. more people preferring private vehicles over public "The oil markets have responded positively to the transport to limit the virus transmission. historic agreement, as well as its robust "Over June, we should see Asia's gasoline demand implementation by participating countries," picking up by some 490,000 bpd (about 1.74 million Mohammad Barkindo, OPEC's secretary general, told tonnes) month-on-month," she said. Reuters. China's June gasoline exports could rebound to some "All in all there is a gradual but steady convergence of 500,000 bpd or even slightly higher, said JBC Energy’s the fundamentals of supply and demand." Rangelova, as China was seen buying more crude. An OPEC delegate, speaking off the record, was also upbeat. But although prices have rallied, they are still Asian, European jet fuel margins rise on supply cuts, far below the budget needs of many countries. more flights "This is a good sign for prices," the delegate said of the export cuts. "We are safe, but need more time to Asian refining margins for jet fuel turned positive for the be more sure - maybe until July or August." first time in a month and European margins rose to the OPEC+ meets virtually on June 10, when it will have a highest level in three weeks on Wednesday, bolstered by full month's data on compliance, to review the deep supply cuts and an uptick in flights in regional agreement. markets. Sources have said OPEC+ may keep the current level The jet fuel refining margin in Singapore flipped to $1.83 of supply reduction after June, rather than scaling it per barrel above Dubai crude on Tuesday, in positive back from July as currently agreed. territory for the first time since April 20. "There are good indications on compliance, and we Measures imposed to curb the spread of the coronavirus have seen prices improving lately," said another have caused jet fuel demand to plunge since February, OPEC delegate. "But the market is still volatile, let's leading to refining losses of as much as $7.23 a barrel on wait." May 5. "The jet fuel market in Asia has already hit a bottom, with China's May gasoline exports seen at multi- some airlines even filing for bankruptcies ... I think the months low - trade, analysts countries easing or removing their lockdowns would definitely help the market a bit," a Singapore-based trader Gasoline exports from China, Asia's top petrol said. exporter, could dive to multi-month lows in May as "But I'm not so optimistic that it can turn the market around refiners turn to domestic markets, industry sources or bring it to pre-pandemic level." and analysts said on Wednesday. Planned refinery turnarounds and run cuts at regional Consultancy FGE estimated that China's May exports refineries have helped curb excess supplies, while could fall to around 300,000 to 350,000 barrels per domestic demand in China kindled hopes for a gradual day (bpd) while one of the sources who tracks such recovery, trade sources said. deals closely said the volume could be even lower at China Aviation Oil (CAO) has been bidding for jet fuel below 800,000 tonnes (218,000 bpd). cargoes in the Singapore physical trade window this That would be less than half the total for March, when month, scooping 245,000 barrels in the last week, which exports were 1.82 million tonnes, according to the represents half of the traded volumes in an otherwise latest official data. subdued market. May 21, 2020 (continued) Aviation data provider Cirium showed six of the top ten with U.S. crude futures up 4.3% at $33.36 a barrel by airlines ranked by number of scheduled flights operated 10:42 a.m. ET (1442 GMT), while Brent gained 3.6% to with passenger jets last week were Chinese. $35.91 a barrel. Aviation is expected to take years to recover to pre-crisis Crude stocks at the Cushing, Oklahoma, delivery hub fell levels as passengers to shy away from travel to avoid by 5.6 million barrels. quarantine. Refinery utilization rates rose by 1.5 percentage points. In Europe, refinery shutdowns, particularly in the Mediterranean, had led to a reduction in prompt jet fuel INSIGHT-Angola's oil exploration evaporates as cargo offers, propping up prices. COVID-19 overshadows historic reforms A number of refineries have cut their jet fuel runs in favour of diesel and gasoline production, which still have The coronavirus pandemic has done in a handful of stronger margins, traders and analysts said. months what even a 27-year civil war did not: it has European profit margins rose to minus 35 cents on brought oil drilling to a halt in Angola, Africa's second- Wednesday, the highest in three weeks, although imports largest oil producer. to the region in May hit the highest level in a year, The consequences could be grave for a poor country that according to Refinitiv data. relies heavily on oil revenues and is saddled with debts Also supporting the jet fuel margins was a gradual that exceed its economic output. increase in the number of airline flights in the region. The halt in oil exploration, which has not been previously "Countries across Europe are flying more and some reported, could represent a setback for one of the most airlines, such as Ryanair, have this week announced ambitious economic reform drives on the continent, flying at a 40% capacity in July," said Selene Law, aimed at cleaning up corruption and attracting foreign market editor at OPIS by IHS Markit. money. It comes as Angola seeks buyers in its push to privatise state energy assets, which is central to the U.S. crude stockpiles drop, fuel inventories rise -EIA reform process. An oil price crash last month to two-decade lows has U.S. crude oil stockpiles fell last week, helping ease prompted all international energy majors operating in concerns about overflowing oil supply, though gasoline Angola - Total, Chevron, ExxonMobil, BP and Eni - to idle and distillate inventories both rose as refiners increased or ditch their drilling rigs, according to company sources, processing rates, the Energy Information Administration Refinitiv ship-tracking data and industry experts. said on Wednesday. France's Total, responsible for almost half of Angola's oil U.S. oil inventories have surged in 2020 as oil output, told Reuters it would not drill for more oil for now consumption dropped due to the coronavirus pandemic due to the coronavirus crisis, instead focusing on current that has caused businesses to shutter and governments production. to restrict citizens' movements. "We have suspended all our drilling activities like all other Crude inventories fell by 5 million barrels in the week to operators in Angola," it said. May 15 to 526.5 million barrels, compared with Sarah McLean, senior analyst at IHS Markit, said it was expectations in a Reuters poll for a 1.2 million-barrel rise. the first time since its records began in 1984 that Angola U.S. gasoline stocks rose by 2.8 million barrels, the EIA had not had a single rig drilling. The London–based said, compared with expectations for a 2.1 million-barrel information provider had expected at least 10 rigs to be drop. Distillate stockpiles, which include diesel and operating there by the end of 2020, the highest number heating oil, rose by 3.8 million barrels, more than for any African nation this year. expected. The Angolan finance ministry and president's office did "The market has pushed up pretty bullishly over the past not respond to Reuters requests for comment, nor did few weeks, but I see product builds in this report that can state oil giant Sonangol, which works in partnership with take away a little bit of the bullish direction," said Gene the foreign oil majors. McGillian, director of market research at Tradition Energy DAMAGED, DOCKED, DORMANT in Stamford, Connecticut.
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