WEEKLY ENERGY RECAP: Weak dollar supports crude fightback

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Updated 09 August 2020

WEEKLY ENERGY RECAP: Weak dollar supports crude fightback

Oil prices advanced to their highest level since early March, hovering near five-month highs. 

Brent crude rose to $44.40 per barrel, while WTI also gained to $41.22. The year-to-date price average for Brent is $40.38.

Among the reasons for the weekly gain was the the larger than expected drop in US commercial stocks for the second consecutive week. Another was the collective action of OPEC countries which together exceeded 100 percent compliance in earlier agreed production cuts.

This involved the cooperation of previous compliance laggards such as Angola, Iraq and Nigeria.

OPEC members produced 23.25 million barrels per day (bpd) in July, up by 970,000 bpd from a 28-year-low in June of 22.28 million bpd.

A weaker US dollar has also helped to support higher oil prices. Because oil is priced in dollars, when the greenback is weak, it becomes cheaper for many countries.

The latest downward movement in the US currency has been blamed on US government interventions to stem the pandemic. The weakening trend may not be over yet with Morgan Stanley reporting that the dollar is the most over-sold in 40 years.

If the currency goes lower again, oil may rise in response.

This could be an important driver for the movement of oil prices which have stayed stubbornly around $40 for weeks.

Despite an increase of COVID-19 cases in many US states, the decision not to shut down commercial activity again has also supported oil prices.

So while we see potential for upward movement, it is likely to be at a slow pace as the threat of a second wave of the coronavirus pandemic hangs over the global economy like a giant cloud.

Demand for refined petroleum products remains far behind its pre-pandemic levels. Daily flight tracking data show commercial flights are still 50 percent below summer 2019 levels. In addition, the US high summer driving season is about to end. 

Conversely, China remains a bright spot for crude demand. Although China’s July crude oil imports fell to 12.13 million bpd from a record high of 12.99 million bpd in June, they were still above 12 million bpd for the second time on record.


Emirati consortium studies implementing wind energy project in Egypt

Updated 29 September 2020

Emirati consortium studies implementing wind energy project in Egypt

  • The coalition has submitted a request to the New and Renewable Energy Authority to allocate land for the purpose

CAIRO: Official sources at the Egyptian Ministry of Electricity and Renewable Energy revealed that an Emirati consortium is currently studying the implementation of a wind farm, with investments of about EGP 8 billion ($500 million).

The coalition has submitted a request to the New and Renewable Energy Authority (NREA) to allocate land for the purpose, and the authority has already agreed to it. The total capacity of the station is about 500 megawatts.

The consortium is carrying out studies that will take two years and that include measuring wind speed, monitoring bird migration and studying the soil for the project, which will take place in the Gulf of Suez region as it has a strong wind force, an important factor.

The station is expected to implement the BOO system (Build, Own, Operate), provided that the coalition sells the energy produced to the Egyptian Electricity Transmission Company, the operator of the national grid, entrusted with the purchase of energy.

The area of land allocated for the establishment of the project — in cooperation with the private sector under the usufructuary right system — is 7,872 km, according to data from the NREA.

The sources pointed out that the average selling price of renewable energy is currently declining, ranging between $0.02 to $0.025 per kilowatt hour. Land is allocated for 2 percent of the energy produced or its equivalent and throughout the project’s duration; then, the authority will recover it.

Egypt is rich in natural resources, including wind and solar energy, which makes it one of the largest producers of renewable energy. The total installed capacity of renewable energies is close to 20 percent of the maximum load.

Egypt plans to increase its total production of renewable energy to about 20 percent of the total electricity generated by 2022, of which 12 percent from wind, 6 percent from hydroelectricity, and 2 percent from solar.