WEEKLY ENERGY RECAP: Calm after the storm

An oil tanker and a container ship sit off shore of the port of the Long Beach during the outbreak of the coronavirus disease (COVID-19) in Long Beach, California, US. (Reuters)
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Updated 31 May 2020

WEEKLY ENERGY RECAP: Calm after the storm

  • The rebound came as countries began to reopen after coronavirus lockdowns

Crude oil prices capped a fifth week of gains without the volatility that characterized much of April when prices plummeted.

Brent crude rose to $35.33 per barrel as WTI advanced to $35.49. 

The spread between Brent and WTI has also been narrowing over the last three weeks, closing last week at $1.87 per barrel. But this week closed at nearly parity.

This may point to speculators overextending in WTI Nymex futures.

While WTI crude registered its highest ever month-to-month movement, it remains about 94 percent below its level at the start of the year. And the current price is still not high enough to encourage upstream capital spending that would help to lift production.

OPEC+ producers gave the market a confidence boost by following through on commitments to crude oil output supplies cuts.

US-China trade tensions, while certainly back in full swing, did not significantly affect price movements over the week.

The average Brent price rose to $28 per barrel in May from $18 per barrel in so-called “Black April,” which was the strongest monthly gain in prices in 21 years.

The rebound came as countries started to reopen after coronavirus-related lockdowns. 

However, prices are moving in a narrow range consistent with the gradual pace of the global recovery. This is what the oil market needs.

The US Energy Information Administration reported a huge jump in the weekly crude oil inventory by 8 million barrels, which is the largest inventory build in four weeks. That brought the overall inventory up to to 535 million barrels, which while significant, did not affect oil prices.

Baker Hughes reported the ninth consecutive week for oil and gas rig declines in the US. They fell to to 301 —  683 lower than this time last year.

 

 

 


Iran rial slides to new low as coronavirus, sanctions weigh

Updated 04 July 2020

Iran rial slides to new low as coronavirus, sanctions weigh

  • The dollar was offered for as much as 215,500 rials, softening from 208,200 on Friday
  • The rial lost about 70% of its value in the months after May 2018 as Iranians snapped up dollars

DUBAI: The Iranian rial fell to a new low against the US dollar on the unofficial market on Saturday, as the economy comes under pressure from the coronavirus pandemic and US sanctions.
The dollar was offered for as much as 215,500 rials, softening from 208,200 on Friday, according to foreign exchange site Bonbast.com. The economic daily Donya-e-Eqtesad’s website gave the dollar rate as 215,250, compared with 207,500 on Friday.
In May 2018, President Donald Trump withdrew the United States from a multilateral deal aimed at curbing Iran’s nuclear program and reimposed sanctions that have since battered the economy.
A drop in oil prices and a slump in the global economy have deepened the economic crisis in the country, which also has the highest death toll in the Middle East from the pandemic.
The rial’s decline has continued despite assurances from Iranian Central Bank Governor Abdolnaser Hemmati last week that the bank had injected hundreds of millions of dollars to stabilize the currency market.
The rial lost about 70% of its value in the months after May 2018 as Iranians snapped up dollars, fearing Washington’s withdrawal from the nuclear deal and sanctions could shrink vital oil exports and severely impact the economy.
The official exchange rate is 42,000 rials per dollar and is used mostly for imports of state-subsidised food and medicine.