WEEKLY ENERGY RECAP: Strikes and storms

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Updated 10 October 2020

WEEKLY ENERGY RECAP: Strikes and storms

  • Hurricane Delta led to a outage of about 90 percent of production, the main contributor to price rises

Crude oil prices recovered to above the $40 barrier for both benchmarks after sharp falls a week earlier. Brent crude advanced to $42.85 per barrel while WTI gained to $40.60 per barrel.

It represented a substantial uplift in an otherwise tight trading range environment.

The Brent/WTI price spread rose to $2.25 per barrel, which means that both benchmarks are moving in parallel momentum.

Hurricane Delta led to a huge outage of about 90 percent of production (or about 5 million barrels per day of medium sour crude oil) from the US Gulf of Mexico.This was the main contributor to the rise in prices over the week.

Although latest data from the EIA showed that US crude oil production hit a nine-week high of 11 million barrels per day (bpd), that may not have yet reflected the shutdown of offshore oil platformsr. This type of crude oil is mostly used for middle distillate refined petroleum products such as diesel and Jet kerosene. As long as travel by road and air remains impacted by the coronavirus, refining margins for such products also remain under pressure.

The next test will come as refineries prepare to process crude for heating fuel as the market awaits signs of whether a severe or mild winter is coming.

Though the global oil market in general and the US oil market in particular have already factored in such output shutdowns and reduced refinery runs, the bigger worry is the growing uncertainty around the second wave of the coronavirus that has forced some countries to consider reverting to either full or partial lockdowns.

The likely fallout for air travel, which is already in a parlous state and accounts for almost 8 percent of global oil demand, is a concern.

An oil industry strike in Norway also helped to buoy prices, however it is unlikely to figure next week after a pay deal was reached.

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

Japan’s capital sees prices fall most in over 8 years as COVID-19 pain persists

Updated 27 November 2020

Japan’s capital sees prices fall most in over 8 years as COVID-19 pain persists

  • Tokyo core CPI marks biggest annual drop since May 2012
  • Data suggests nationwide consumer prices to stay weak

TOKYO: Core consumer prices in Tokyo suffered their biggest annual drop in more than eight years, data showed on Friday, an indication the hit to consumption from the coronavirus crisis continued to heap deflationary pressure on the economy.
The data, which is considered a leading indicator of nationwide price trends, reinforces market expectations that inflation will remain distant from the Bank of Japan’s 2% target for the foreseeable future.
“Consumer prices will continue to hover on a weak note as any economic recovery will be moderate,” said Dai-ichi Life Research Institute, which expects nationwide core consumer prices to fall 0.5% in the fiscal year ending March 2021.
The core consumer price index (CPI) for Japan’s capital, which includes oil products but excludes fresh food prices, fell 0.7% in November from a year earlier, government data showed, matching a median market forecast.
It followed a 0.5% drop in October and marked the biggest annual drop since May 2012, underscoring the challenge policymakers face in battling headwinds to growth from COVID-19.
The slump in fuel costs and the impact of a government campaign offering discounts to domestic travel weighed on Tokyo consumer prices, the data showed.
Japan’s economy expanded in July-September from a record post-war slump in the second quarter, when lockdown measures to prevent the spread of the virus cooled consumption and paralyzed business activity.
Analysts, however, expect any recovery to be modest with a resurgence in global and domestic infections clouding the outlook, keeping pressure on policymakers to maintain or even ramp up stimulus.