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Oil surges on biggest jump in US gasoline demand in 11 months – BNNBloomberg.ca

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Oil rallied on optimism that consumption could gradually return as major producers continue to cut output to counter a global glut.

West Texas Intermediate futures surged 22 per cent Wednesday. U.S. gasoline stocks fell by 3.67 million barrels compared to an estimated build of 2.49 million, according to the U.S. Energy Information Administration. Weekly gasoline supplied, an indicator of demand, rose by 549,000 barrels a day, the most since May.

“That was a nice surprise to the market,” Nick Holmes, portfolio manager at Tortoise, said regarding better-than-expected results for crude inventory and gasoline supply in the EIA report.

The discount on crude for June delivery relative to July, a structure known as contango, tightened to as little as US$3.28 a barrel after blowing out to as wide as $7.69 Tuesday.

The narrowing gap in the front-month spread suggests that the concern about storage may be easing, according to Michael Lynch, president of Strategic Energy & Economic Research Inc. “People are starting to think storage isn’t going to get quite so overstuffed after the EIA report,” Lynch said.

The agency reported a smaller-than-expected 8.99 million-barrel increase in national crude stockpiles and a 3.64 million-barrel build at Cushing, Oklahoma, the delivery point for futures.

Producers in the shale-rich Permian Basin, and elsewhere in the U.S., will cut about two million barrels a day of output in May compared to March, said Mercuria Chief Executive Officer Marco Dunand in an interview.

Russian oil companies will cut output by about 19 per cent from February levels, the nation’s Energy Minister, Alexander Novak told the Interfax news agency. Nigeria, which has been struggling to sell its oil even at $10 a barrel, will ship the lowest volume of its key Qua Iboe crude grade since 2016 in May and June.

Prices

• WTI for June delivery climbed US$2.72 to settle at US$15.06 a barrel in New York.
• Brent for June settlement gained US$2.08 to US$22.54 a barrel.
• Gasoline futures gained six cents to 72.72 cents US per gallon.

Valero Energy Corp. said in its first quarter earnings conference call that it sees gasoline demand to recover gradually, along with jet fuel at a slower pace. The company sees the best recovery in demand in the Midwest.

Other oil news:

• While global oil prices remain near multi-decade lows, the heads of two major Canadian crude producers see reasons for hope that the market will rebound in the months ahead.
• Saudi Arabia may now be blowing through its reserves at the fastest pace in at least two decades, but the government is barely using the holdings to cover fiscal needs.
• OMV’s refineries in Europe are currently running at about 80 per cent and will operate at roughly that level for the full year

–With assistance from Richard Stubbe, Alex Longley, Dan Murtaugh and Sharon Cho.

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HSBC warns it could face reprisals in China if UK bans Huawei equipment: Telegraph – Reuters

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FILE PHOTO: HSBC’s building in Canary Wharf is seen behind a City of London sign outside Billingsgate Market in London, Britain, August 8, 2018. REUTERS/Hannah McKay

(Reuters) – HSBC Holdings Plc (HSBA.L) Chairman Mark Tucker has warned Britain against a ban on networking equipment made by Huawei Technologies Co Ltd, claiming the bank could face reprisals in China, the Telegraph reported on Saturday.

Tucker made the claim in private representations to British Prime Minster Boris Johnson’s advisers, the newspaper reported here citing industry and political sources.

Britain designated Huawei a “high-risk vendor” in January, capping its 5G involvement at 35% and excluding it from the data-heavy core of the network. It is looking at the possibility of phasing Huawei out of its 5G network completely by 2023, according to officials.

Reporting by Ismail Shakil in Bengaluru; Editing by Dan Grebler

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OPEC+ Agrees On Extending Record Output Cuts – OilPrice.com

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OPEC+ Agrees On Extending Record Output Cuts | OilPrice.com

Tom Kool

Tom majored in International Business at Amsterdam’s Higher School of Economics, he is Oilprice.com’s Head of Operations

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    OPEC and its partners concluded their meeting on Saturday afternoon, announcing that it would extend its current production cut deal.

    Algeria’s Energy Minister Mohamed Arkab, OPEC’s current President summed up the group’s sentiment by saying that “Despite the progress achieved to date, we cannot afford to rest on our laurels,”.

    The last couple of days, the cartel’s de-facto leader Saudi Arabia negotiated with other OPEC members and some non-OPEC countries including Russia, Kazakhstan and Azerbaijan to extend the current 9.7 million bpd output cuts for at least another month.

    Most countries partaking in the record production cuts were willing to continue the current deal, but poor compliance from countries like Iraq, Nigeria and Kazakhstan has caused discontent among other OPEC members, some of which have even made deeper cuts than agreed on in April.

    During the virtual meeting on Saturday, the cartel agreed that the countries that were unable to reach full conformity in May and June will have to compensate for this in July, August and September.

    Oil prices effectively doubled during the month of May as global demand started to recover and record output cuts and worldwide well shut-ins decreased the monster glut.

    While the OPEC+ deal extension undoubtedly will have a bullish effect on markets, prices aren’t likely to rip much higher on Monday as the OPEC+ news has largely been priced in already.

    For oil prices to make a full recovery, global demand will have to recover and crude inventories have to be drawn down, both of which will likely take up to two years. Pioneer’s Scott Sheffield said that the quick rebound of demand to around 94-95 mb/d following the “reopening” of so many economies will give way to stagnation, saying that demand won’t reach pre-pandemic levels until 2022 or even 2023.

    For now, the next bullish catalyst for oil could come from Saudi Aramco, which could set the trend for higher oil prices in June as it is expected to release its OSPs (official selling prices) on Monday. Aramco’s OSPs are often a leading indicator for Iraqi, Iranian and Kuwaiti crude prices, and last month, Brent futures rallied after Riyadh hiked its prices for crude to Asia.

    By Tom Kool of Oilprice.com

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      OPEC, Russia to extend record oil cuts to end of July amid pandemic – CBC.ca

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      OPEC, Russia and allies agreed on Saturday to extend record oil production cuts until the end of July, prolonging a deal that has helped crude prices double in the past two months by withdrawing almost 10 per cent of global supplies from the market.

      The group, known as OPEC+, also demanded countries such as Nigeria and Iraq, which exceeded production quotas in May and June, compensate with extra cuts in July to September.

      OPEC+ had initially agreed in April that it would cut supply by 9.7 million barrels per day (bpd) during May-June to prop up prices that collapsed due to the coronavirus crisis. Those cuts were due to taper to 7.7 million bpd from July to December.

      “Demand is returning as big oil-consuming economies emerge from pandemic lockdown. But we are not out of the woods yet and challenges ahead remain,” Saudi Energy Minister Prince Abdulaziz bin Salman told the video conference of OPEC+ ministers.

      Benchmark Brent crude climbed to a three-month high on Friday above $42 a barrel, after diving below $20 in April. Prices still remain a third lower than at the end of 2019.

      WATCH | Canadian oil producers don’t see relief after OPEC deal to cut output:

      Richard Masson, chair of World Petroleum Council-Canada, says Ottawa needs to move soon if it plans to help producers, as companies face ‘really tough decisions.’ 0:55

      “Prices can be expected to be strong from Monday, keeping their $40 US plus levels,” said Bjornar Tonhaugen from Rystad Energy.

      Saudi Arabia, OPEC’s de facto leader, and Russia have to perform a balancing act of pushing up oil prices to meet their budget needs while not driving them much above $50 US a barrel to avoid encouraging a resurgence of rival U.S. shale production.

      1 billion barrels of excess oil inventories

      The April deal was agreed under pressure from U.S. President Donald Trump, who wants to avoid U.S. oil industry bankruptcies.

      Trump, who previously threatened to pull U.S. troops out of Saudi Arabia if Riyadh did not act, spoke to the Russian and Saudi leaders before Saturday’s talks, saying he was happy with the price recovery.

      While oil prices have partially recovered, they are still well below the costs of most U.S. shale producers. Shutdowns, layoffs and cost cutting continue across the United States.

      As global lockdown restrictions to halt the spread of the coronavirus are being eased, oil demand is expected to exceed supply sometime in July but OPEC has yet to clear 1 billion barrels of excess oil inventories accumulated since March.

      Tonhaugen said Saturday’s decisions would help OPEC reduce inventories at a rate of 3 million to 4 million bpd over July-August.

      Workers are seen in Aramco’s oil separator at processing facility in Abqaiq, Saudi Arabia, in September 2019. (Amr Nabil/The Associated Press)

      “The quicker stocks fall, the higher prices will get. And that is crucial for many OPEC+ economies, whose fiscal budgets count on oil sales,” he said.

      Nigeria’s petroleum ministry said Abuja backed the idea of compensating for its excessive output in May and June.

      Iraq, with one of the worst compliance rates in May, agreed to extra cuts although it was not clear how Baghdad would reach agreement with oil majors on curbing Iraqi output.

      Workers are seen in the Nihran Bin Omar field north of Basra, Iraq, in January 2017. (Nabil al-Jurani/The Associated Press)

      Iraq produced 520,000 bpd above its quota in May, while overproduction by Nigeria was 120,000 bpd, Angola’s was 130,000 bpd, Kazakhstan’s was 180,000 bpd and Russia’s was 100,000 bpd, according to OPEC+ data.

      OPEC+’s joint ministerial monitoring committee, known as the JMMC, would now meet every month until December to review the market, compliance and recommend levels of cuts.

      The next JMMC meeting is scheduled for June 18, while the next full OPEC and OPEC+ meeting will take place on Nov. 30-Dec. 1.

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