WEEKLY ENERGY RECAP: Traders keep their heads amid increased risk to tankers

While insurers seem to have responded to the increased risks to shipping, oil traders are more sanguine. (Reuters)
Updated 15 June 2019

WEEKLY ENERGY RECAP: Traders keep their heads amid increased risk to tankers

  • Oil seems to be steady in the $60 per barrel range for Brent even if the risks for tankers in the Arabian Gulf have gone up

RIYADH: Counterintuitively, the latest attacks on tankers in the Gulf of Oman which ratcheted up regional tensions, did not have the same effect on the oil price, which ended the week lower. 

Brent crude and WTI prices deteriorated to $62.01 and $52.51 per barrel respectively. In the past even an isolated tanker hijacking or fire was enough to send the price rocketing — but these days traders appear more fixated on where global trade winds are blowing.

Oil seems to be steady in the $60 per barrel range for Brent even if the Arabian Gulf is now considered as one of the riskiest areas for oil tankers since the Iraq War. 

It is worth remembering that the Arabian Gulf is where more than a third of the world’s hydrocarbons are transported — a fact reflected in the rising premiums for tanker insurance in the region.

Yet while insurers seem to have responded to the increased geopolitical risks, oil traders are more sanguine. A slowing global economy, persistent trade war worries and rising shale output have combined to cap price increases.

The latest monthly reports from both OPEC and the IEA also cut their demand forecasts, adding to bearish sentiment.

OPEC, in its report, cited weaker growth in global oil demand amid escalated and ongoing global trade tensions, as a key factor in the downward adjustments to the outlook for global oil demand.

  • Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq

 


Oil slumps more than 4% on coronavirus fears

Updated 28 February 2020

Oil slumps more than 4% on coronavirus fears

  • Traders fret about impact of spreading virus on crude demand, particularly from China

LONDON: World oil prices tumbled by more than 4 percent on Thursday, as traders fretted about the impact of spreading coronavirus on crude demand, particularly from key consumer China.

Brent oil for April delivery tanked almost 4.2 percent to $51.20 per barrel, while New York’s WTI crude for the same month dived nearly 5 percent to $46.31.

“Concerns that the virus will prompt a global slowdown, weaker consumer confidence and reduced travel has raised concerns about lower demand, weighing on prices,” said CMC Markets analyst Michael Hewson.

Investors are growing increasingly fearful about the economic impact of the new coronavirus or COVID-19 outbreak. 

The virus continues to spread meanwhile, with Brazil reporting Latin America’s first case, and Denmark, Estonia, Greece, Georgia, Norway and Pakistan following suit.

Around 2,800 people have died in China and more than 80,000 have been infected. There have been more than 50 deaths and 3,600 cases in dozens of other countries, raising fears of a pandemic.

The spread of the virus to large economies including South Korea, Japan and Italy has raised concerns that growth in fuel demand will be limited. 

Consultants Facts Global Energy forecast oil demand would grow by 60,000 barrels per day in 2020, a level it called “practically zero,” due to the outbreak.

US President Donald Trump sought to assure Americans on Wednesday evening that the risk from coronavirus remained “very low,” but global equities resumed their plunge, wiping out more than $3 trillion in value this week alone.

“The negative price impact would intensify if the coronavirus were declared pandemic by the World Health Organization, something that looks imminent,” said PVM Oil Associates analyst Tamas Varga.

“The mood is gloomy and the end of the tunnel is not in sight – there is no light ahead just darkness. Not even a refreshingly positive weekly US oil report was able to lend price support.”

Gasoline stockpiles dropped by 2.7 million barrels in the week to Feb. 21 to 256.4 million, the Energy Information Administration (EIA) said on Wednesday, amid a decline in refinery throughput. Distillate inventories fell by 2.1 million barrels to 138.5 million.

US crude oil stockpiles increased by 452,000 barrels to 443.3 million barrels, the EIA said, which was less than the 2-million-barrel rise analysts had expected.

The crude market is watching for possible deeper output cuts by the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+.

“Oil is in freefall as the magnitude of global quarantine efforts will provide severe demand destruction for the next couple of quarters,” said Edward Moya, senior market analyst at OANDA. 

“Expectations are growing for OPEC+ to deliver deeper production cuts next week.”

OPEC+ plans to meet in Vienna on March 5-6.