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Brent crude surges past $40 as Nigeria crude seeks buyers

The price of Brent crude surged on Wednesday to a near three-month high amid optimism among investors and oil traders that major oil producers will extend oil production cut, as global demand picks up. Brent crude gained about 1.49%, at $40.18, 3.30 am Nigerian time – the highest level since March 6, having gained 3.3% on Tuesday.

A meeting by OPEC+ (a group comprising OPEC, Russia and other major oil producers) is expected to be held virtually on Thursday. The oil production cuts are currently due to run through May and June.

Meanwhile some traders hoped a couple of Indian oil tenders could mop up oil to reduce a significant glut of Nigerian oil while European demand for West African grades remains nearly nil amid sluggish refining activity. India’s IOC has two buy tenders running mostly seeking

West African crude. One is for 2 million barrels cargoes loading July 4-13 and the other for 1 million loading Aug. 1-10 and both are set to close on Friday. India has been a key outlet for Nigerian crude, with repeated tenders sometimes closing with no awardee only to resurface seeking the same grades and delivery dates, as the major importer seeks to secure low prices for orphaned barrels.

A backlog of floating storage continues to hit demand, especially in Europe, where the appetite for new imports will need to wait until the storage backlog is cleared. 

Nigerian oil continues to attract almost no buyers there, as refinery activity remains muted amid poor margins and slow demand for some oil products.

Unprecedented producer cuts especially on heavier grades have dealt a boon to Angolan oil, for which there has been significant Chinese demand. At over a dozen cargoes still yet to be sold for July,

Also OPEC leader Saudi Arabia and non-OPEC Russia have agreed a preliminary deal to extend existing record oil output cuts by one month while raising pressure on countries with poor compliance to deepen their cuts.

“As virus-related lockdown measures continue to be lifted, we expect that demand will gradually recover,” Capital Economics said in a note to Reuters, estimating that global oil consumption will fall to just under 92 million BPD on average in 2020. This compared with 100.2 million barrels per day consumed globally last year,” Capital Economics added before COVID-19 pandemic disrupted global demand negatively.

Meanwhile, Adeagbo Adedayo Sadiq, Country Manager, Scope Markets said “Taking a closer look at Nigeria’s main commodity export, crude oil. Every day we need the energy to accomplish a lot of tasks from manufacturing down to the food we eat. Investing in this energy that is involved in our daily activity is very lucrative. As we can see that a lot of events like US/Iran face-off and COVID-19 Pandemic had an impact on the price of crude oil in the first two quarters of the year 2020.  The oil price benchmark fell to its lowest ever in history as of March 8th, 2020, losing about 90% of its market value for the year 2020. This piece of information is very useful as an investor or to anyone who intends to trade crude oil.  

“Currently the price of crude oil has risen to more than 40%. This means that if you had invested in this crude oil futures as when the price was low your investment would have appreciated at that level of gain. With additional production cuts announced by OPEC alongside Russia/Saudi price deal, we tend to see further upside in the price of crude oil.  So while crude oil is appreciating in value at this period, it’s time for anyone who wishes to invest in energy trading to act now.”