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Oil up 2%; Large US Stock Draw Eyed after Hurricane Data Distortion  By Investing.com

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© Reuters.

By Barani Krishnan

Investing.com – Oil prices rebounded on Wednesday ahead of the U.S. government’s weekly report on stockpiles that could show large drawdowns due to data distortion caused by Hurricane Delta.

Crude prices also got a boost from optimistic talk by the OPEC+ alliance of oil producing countries that it expects compliance to production cuts to be as high as 102% in September. 

Occidental Petroleum (NYSE:) CEO Vicki Hollub provided further optimism by forecasting that global supply and demand will rebalance by end-2021 and that the United States will never return to the record production of 13 million barrels per day hit in March this year.

New York-traded , the key indicator for U.S. crude prices, settled at $41.04 per barrel, up 84 cents, or 2.1%, on the day. On Tuesday, WTI rose 2%. The gains of the past two sessions accounted for the total 4.2% lost between Friday and Monday.

London-traded crude, the global benchmark for oil, settled up 87 cents, or 2%, at $43.32. 

Despite the rebound, some analysts expressed concerns about the outlook for oil in the near term as France and the U.K. announced more Covid-19-related movement restrictions after a fresh surge in infections.

U.S. Treasury Secretary Steven Mnuchin said there was little chance of the White House agreeing with rival Democrats in Congress on an economic stimulus that would help financially distressed Americans. 

“WTI crude seems destined to be stuck around the $40 a barrel level on dollar strength and demand uncertainty,” said Ed Moya, analyst at OANDA in New York.

“Oil will struggle to rally as the dollar seems poised to stabilize as the ECB seems positioned to deliver fresh stimulus a lot sooner than the Fed,” Moya said, referring to the European Central Bank and the U.S. Federal Reserve. “Demand uncertainty will remain in place until Europe and America get the virus spread under control.” 

Oil traders will be on the lookout for industry data on weekly oil stockpiles due from the American Petroleum Institute at 4:30 PM ET (20:30 GMT). 

Analysts have forecast a  of 2.84 million barrels for the week ended Oct. 9, versus a build of 501,000 barrels in the previous week, due in part to data distortion by the recent Hurricane Delta. 

The government-run Energy Information Administration will issue on Thursday official inventory data for last week.

 

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Commodities

Bunker market looks to fragile demand, price recovery

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The glut in low sulfur fuels has been a double-edged sword for the shipping industry. It muted the impact of availability and compatibility concerns at the cost of lower prices, which have mirrored the wider crude market since May.

Demand for very low sulfur fuel oil is set to recover slowly in line with increasing confidence in the industry’s new fuel of choice, according to some experts.

Crude prices have plateaued around $40/b for several months as a tentative recovery in demand has stalled and the OPEC+ producer alliance has eased off on its output cuts. A similar situation has occurred in Rotterdam’s marine fuels prices, which steadied around the $300/mt mark in the third quarter.

S&P Global Platts Analytics predicts crude oil prices at $44/b by the end of the year and $50/b by end-2021, suggesting any improvement in VLSFO prices would also likely be slow going. Low refinery margins and spikes in COVID-19 infection rates have weighed on the recovery.

Some industry watchers, while downbeat on demand recovery prospects over the next 6-12 months, highlighted how sturdy bunker demand has been, with shipping continuing to operate amid the coronavirus pandemic and been responsible for 90% of global trade.

Shipping freight report outlook 2020 Q4

Find more on shipping market trends in S&P Global Platts’ special report – click to view

“Demand impact for the bunker market has been far less than for other sectors,” Steve Christy, at Navig8, said in a research note. “Fuel oil demand [is] running at around 0.5 million b/d below 2019 levels through this year and next year.”

But the weakness in demand has allowed the industry to come to terms with VLSFO.

Technical issues

The 0.5% sulfur, International Maritime Organization-compliant fuel had given industry participants sleepless nights over whether there would be compatibility issues, given the various blends available, and whether they would be able to get hold of the fuel at all ports.

Euronav CEO Hugo De Stoop told S&P Global Platts in a recent interview that, while it was a change many supported, it has led to some technical issues.

“A lot of people are still suffering from it. We may have suffered a little bit less because we were able to accumulate the product that we tested before putting into our engine,” the tanker boss said.

“Normally, the way to look at it is that you go to the pump station with your ship and you are provided something that has a certificate of quality, but unfortunately, the certificate of quality does not really match the new fuel, it’s more a match of the old fuel.”

But he noted that VLSFO is a “logical fuel”, compared with high sulfur fuel oil, the previous fuel of choice, given regulatory and cost concerns over using the necessary scrubber technology to make the latter viable.

Much of IMO 2020’s impact has been muted by the global coronavirus pandemic. But a new normal is slowly emerging and, with it, greater global availability and capacity at ports, according to industry sources.

ExxonMobil has made its fuel available at an increasing number of ports as port capacity grows, the company’s marine fuels technical adviser, Armelle Breneol, said at the Petrospot Summit.

Amid changes in infrastructure and supply, bunker demand centers have not changed due to IMO 2020, sources say. But competitive pricing could challenge that.

Bunker prices for VLSFO at the smaller bunker port in Lisbon have rivaled those at the nearby Mediterranean hub of Gibraltar during Q3, averaging $328/mt while Gibraltar averaged $331/mt, Platts data shows.

As global availability of low sulfur fuels increases, HSFO supply has tightened, creating something of a supply-demand mismatch.

Even in the new low sulfur environment, HSFO continued to account for 25% of bunker sales at Rotterdam in the first half of this year, and 21% of Singapore’s September sales, data from Rotterdam port authority and the Maritime and Port Authority of Singapore shows.

Analysts expect HSFO to gain even more traction for the rest of 2020, as more ships install scrubbers to comply with the sulfur cap rules.

Scrubber installations in the VLCC and Capesize sectors amount to 30% of the fleet, with that likely to grow to 35% by the end of the year, BIMCO chief shipping analyst Peter Sand said.

This comes despite the odds stacked against this mode of IMO 2020-compliance. It would take approximately six to seven years to pay back a scrubber installation worth $3.5 million on an Aframax vessel at Rotterdam’s VLSFO-HSFO spread averaging $48/mt in Q3, Platts data and Platts Analytics estimates show.

scrubber investments payback time

This compares with a considerably shorter payback period in Q1 of between one and two years, when the spread averaged $159/mt.

There are also questions over whether scrubbers would continue to hold up if the regulatory environment changes quickly.

The range of fuel options for shipowners is likely to further increase as green regulation changes. In what can only be described as a dramatic year for the marine fuel market, some are hailing 2020 so far as a useful indicator of the pace of change still to come.



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Oil Demand May See Lasting Impact From Pandemic, World Bank Says By Bloomberg

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© Reuters. Oil Demand May See Lasting Impact From Pandemic, World Bank Says

(Bloomberg) — Oil demand could see “lasting impacts” from the coronavirus while modest gains are projected in metals and agriculture prices as commodity markets recover from the shock of the pandemic, according to the World Bank.

The World Bank boosted its projections from April for the average oil price in 2020 and 2021 to $41 a barrel and $44, respectively, as a slow recovery in demand is matched by an easing in supply restrictions. That still leaves prices well below 2019 levels of $61. Outside of energy, a small decline in metal prices will be offset by an increase in agricultural prices this year.

The swift recovery in oil prices following April’s price rout has stalled as the resurgent coronavirus spurs governments to rethink reopening plans. While stimulus can help buffer the impact, Covid-19 presents a challenge to commodity exporters, with policy makers needing to allow their economies to adjust smoothly to a “new normal” should the pandemic persist.

“In the post-Covid world, these countries need to be more aggressive in implementing policies to reduce their reliance on oil revenues,” said Ayhan Kose, director of the World Bank Group’s Prospects Group.

The pandemic could also have “lasting impacts” on oil demand through changes in consumer and employment behavior, according to the report. Air travel could see a permanent reduction, as business travel is curtailed in favor of remote meetings, reducing demand for jet fuel.

The institution expects metals and agriculture will continue to see modest price gains in the coming year, at 2% and 1% respectively, with metals buoyed by China’s rapid economic recovery and agricultural prices boosted by global food-supply disruptions.

The main risk to the price forecasts is the duration of the pandemic, including the risk of an intensifying second wave in the Northern Hemisphere and the speed at which a vaccine is developed and distributed, the World Bank said.

©2020 Bloomberg L.P.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Putin Says Russia Open to Delaying Planned OPEC+ Output Hike By Bloomberg

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© Reuters. Putin Says Russia Open to Delaying Planned OPEC+ Output Hike

(Bloomberg) — Russia doesn’t rule out delaying scheduled production hikes by the OPEC+ alliance, President Vladimir Putin said, the latest sign the cartel could restrain crude output for longer as the pandemic crimps demand again.

Production cuts are due to be eased — as part of a gradual tapering — from January but the cartel has hinted it may change tack as demand falters. While Putin said his preference was to adhere to the current plan, his comments are a show of unity between Russia and Saudi Arabia, whose leaders have been engaged in intense telephone diplomacy this month.

“We think there is no need to change anything now,” Putin said Thursday in his address to the Kremlin-backed Valdai Club. Yet “we don’t rule out that we may keep the current restrictions on output, that we don’t lift them as soon as we had planned earlier.”

rose after Putin’s remarks. On Friday, prices again retreated on concern that a second wave of the coronavirus may throw the energy demand recovery in Europe and the U.S. into reverse.

The Organization of Petroleum Exporting Countries and its allies, due to add almost 2 million barrels a day starting January, have warned of a precarious outlook, and increasingly traders have signaled the market can’t absorb the extra barrels.

“If necessary, we can take a decision on further cuts,” Putin said. “But so far we simply see no such need.”

United Front

After two phone calls in a week between Saudi Arabia’s Crown Prince Mohammed Bin Salman and Putin, the countries’ oil ministers displayed a united front at the last OPEC+ meeting. Their top oil officials, Prince Abdulaziz bin Salman and Alexander Novak, offered similarly bearish views and the prince called on the cartel to be “proactive” and ready to “head off negative trends and developments — to nip them in the bud.”

OPEC+ ministers will debate whether to stick to their tapering plan — which was decided during the depths of the oil crisis in April — at a meeting scheduled for Nov. 30-Dec. 1. In July, the group delayed by one month a similar production increase amid doubts about the strength of oil demand.

OPEC+ is a complex yet effective mechanism for stabilizing the global oil market, Putin said. “In this fragmented world, such an approach is really way more fruitful,” he said. Cooperation within the alliance “not only allows to solve specific problems but also is able to breathe new life into multilateral diplomacy.”

Putin spoke hours after Rosneft PJSC Chief Executive Officer Igor Sechin — a longtime OPEC+ skeptic — acknowledged that interactions between energy-producing nations are necessary, and called for action to stabilize the market.

Close Ally

While he didn’t mention OPEC+ by name, Sechin said that the world economy — and oil consumption — may start to recover next year, but that “humankind needs to take coordinated actions to achieve such a result.”

Sechin, a close ally of Putin, said in March — during a price war with Saudi Arabia — that Russia’s cooperation with OPEC could be over.

Despite Sechin’s opposition to OPEC+, Rosneft has been cutting its crude production in line with the group’s agreement. Russia’s overall compliance with the OPEC+ deal has been at 96% to 97% in the past two months.

 

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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