WEEKLY ENERGY RECAP: Prices remain in narrow band

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Updated 28 June 2020

WEEKLY ENERGY RECAP: Prices remain in narrow band

  • Oil demand is improving, but the uneven pace of the rebound has created challenges

Brent crude declined to $41.02 per barrel last week as WTI also retreated to $38.49 per barrel. Both grades were down by about a dollar.

On a monthly basis, Brent has been moving in a narrow range between $38 and $42 per barrel since the end of May.

This is a healthy sign both for the oil market and the wider global economy, especially given the upheaval caused by the pandemic and the recent pickup in cases across some major economies.

The slight drop in oil prices might be explained by the record spike in COVID-19 cases and the increase in global oil inventories.

The huge glut remained in oil and refined petroleum product inventories onshore and offshore in idled tankers, despite some news about such floating storage volumes starting to shrink.

It is worth remembering that the record output cuts undertaken by OPEC+ were not intended to provide a short-term boost for prices but rather a medium-term improvement for market balance.

Although oil demand is improving in most countries, this recovery is getting more selective in terms of demand for refined petroleum products. Gasoline consumption is rising as economies emerge from lockdown, but the uneven pace of the rebound has created challenges for refineries seeking to anticipate demand.

There has, for example, been a shift from diesel to gasoline as people are slow to return to public transport. This change in refining behavior will affect the refining margins for other products such as jet kerosene fuel.

Jet fuel consumption is still down by almost half compared with the pre-pandemic era. Now refiners need to cope with a much stronger rebound in gasoline demand compared with diesel and jet fuel. This requires a reconfiguration of refining programs to be able to shift the yield toward more light distillates and less middle distillates.

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

Saudi Arabia’s 6-point plan to jumpstart global economy

Updated 07 July 2020

Saudi Arabia’s 6-point plan to jumpstart global economy

  • Policy recommendations to G20 aim to counter effects of pandemic

DUBAI: Saudi Arabia, in its capacity as president of the G20 group of nations, has unveiled a six-point business plan to jump start the global economy out of the recession brought on by the COVID-19 pandemic.

Yousef Al-Benyan, the chairman of the B20 business group within the G20, told a webinar from Riyadh that the response to the pandemic -— including the injection of $5 trillion into the global economy — had been “reassuring.”

But he warned that the leading economies of the world had to continue to work together to mitigate the effects of global lockdowns and to address the possibility of a “second wave” of the disease.

“Cooperation and collaboration between governments, global governance institutions and businesses is vital for an effective and timely resolution of this multi-dimensional contagion transcending borders,” Al-Benyan said.

“The B20 is strongly of the view there is no alternative to global cooperation, collaboration and consensus to tide over a multi-dimensional and systemic crisis,” he added.

The six-point plan, contained in a special report to the G20 leadership with input from 750 global business leaders, sets out a series of policy recommendations to counter the effects of the disease which threaten to spark the deepest economic recession in nearly a century.

The document advocates policies to build health resilience, safeguard human capital, and prevent financial instability.

It also promotes measures to free up global supply chains, revive productive economic sectors, and digitize the world economy “responsibly and inclusively.”

In a media question-and-answer session to launch the report, Al-Benyan said that among the top priorities for business leaders were the search for a vaccine against the virus that has killed more than half-a-million people around the world, and the need to reopen global trade routes slammed shut by economic lockdowns.

He said that the G20 response had been speedy and proactive, especially in comparison with the global financial crisis of 2009, but he said that more needed to be done, especially to face the possibility that the disease might surge again. “Now is not the time to celebrate,” he warned.

“Multilateral institutions and mechanisms must be positively leveraged by governments to serve their societies and must be enhanced wherever necessary during and after the pandemic,” he said, highlighting the role of the World Health Organization, the UN and the International Monetary Fund, which have come under attack from some world leaders during the pandemic.

Al-Benyan said that policy responses to the pandemic had been “designed according to each country’s requirements.”

Separately, the governor of the Saudi Arabian Monetary Authority said that it was “too early” to say if the Kingdom’s economy would experience a sharp “V-shape” recovery from pandemic recession.