Heavy Crude to Lose Ground
The announcement that OPEC is relaxing its production cuts could signal the end of the bull run on heavier crude and products. The OPEC cut has seen heavier crude in significant demand, this is especially true of residual products like high sulphur fuel oil which have seen increased demand from scrubber-fitted vessels and power production in the Middle East and Pakistan. With more heavier crude to enter the market this could weaken the outright crude grades – such as Urals or Arab heavy – and lower prices of residual products.
No Libyan Exports Anytime Soon
Libya plans to export just 1.2mn barrels in August, down almost 40% from July, as most of the OPEC member’s oil facilities remain shut amid the ongoing civil war. The Bouri and Farwah terminals will each ship one cargo of 600,000 barrels, according to an initial loading programme seen by Bloomberg. Both terminals lie offshore in the Mediterranean Sea, miles distant from the turmoil disrupting the bulk of Libya’s onshore oil facilities. Although the country holds Africa’s largest oil reserves, the country has been suffering from a three-way civil way that has prevented significant exports.
US Refining Capacity Shrinking Rapidly
American refining capability is set to fall by the largest amount seen in a decade as the pandemic and resultant demand collapse has ravaged the industry. The COVID-19 pandemic has slashed global fuel demand as much as 30%. As a result, In the United States, Marathon Petroleum Corp will close California and New Mexico plants in response to the demand slump. This would be a combined 523,000 barrels per day of oil, or nearly 3% of total U.S. refining, reducing capacity to 18.5 million bpd, according to Reuters calculations.
EIA Reports Large Crude Draw
The American Petroleum Institute yesterday reported a larger-than-expected draw of 8.6 million barrels in US commercial crude inventories. The EIA, however, confirmed that there was a smaller draw of 7.4 million in US crude stocks, but builds in oil products and in Cushing’s oil stocks.
Key Data
Crude : -7.4MM bbls
Gasoline : +0.4
Distillate : +1.6
Cushing : +0.5