-By Fred Ojiegbe
As different countries of the world begin to ease lockdown, the global oil market is responding to the development with positive rise in prices of crude oil.
In recent times, there was a recent drop in supply glut and improvement in oil demand, as rebound in the global oil market is gradually emerging.
Oil prices have been on the rise based on the assurances for a recovery in oil demand and economic activities, as Brent crude now sells above $30.
According to information obtained from oilprice.com, the Brent crude shot up to $34.29 as on Friday, 22 May.
Also, the American headline crude, West Texas Intermediate (WTI) sells $31.92 per barrel.
Locally, the Nigerian headline crude, Bonny Light, also moved up to sell at $34.46 per barrel.
The expectation for fuel demand has gone up, as some U.S states and several countries in Europe, Asia, Africa and others are gradually easing the lockdown.
Crude oil prices are also surging higher, Brent crude nears $30 per barrel with the slowdown in supply glut and improvement in oil demand due to easing of lockdown in economies across Europe, Asia, Africa, as well as the middle East.
Also, the federal government has gradually eased the first phase of lockdown where major essential services providers and manufacturers have been allowed to resume work in order to avoid complete economic collapse.
Consequently, it appears that the storage capacity crisis is easing off, as the price rally that is being experienced is likely to extend further in May or even beyond.
Statistics shows that inventories rose by only 1.8 million barrels per day recently, which if confirmed, would represent the smallest increase compared to March, when the Coronavirus began ravaging the entire world.
This shows that the supply glut is gradually easing. It also demonstrates just how sensitive the market has become to any change from the prevailing narrative in which global storage space could potentially fill as soon as late May, early June.
According to some analysts and the International Energy Agency (IEA), the global oil demand plunged by almost 30% in the month of April, but recovery is expected to be slow, especially with the continued shutdown of airports and flight operations.
With the output cut by OPEC+ and top oil producers being effective from May 1, the oil market crisis is expected to be gradually easing off.
In another development, there seems to be a silver lining at the end of the cloud as global commercial activities which were ravaged by coronavirus pandemic thereby forcing closures and massive supply glut in the oil market are gradually picking up.
Group Managing Director of Nigerian National Petroleum Corporation (NNPC), Mallam. Mele Kyari, corroborated the assertion recently in a interview with newsmen.
Kyari announced that the glut in the international crude oil market in the last few weeks was gradually easing off, causing prices to pick up slowly, as traders are beginning to find shelter for the commodity in their countries.
It was reported in April that thousands of ships filled with crude were stranded at sea with nowhere to go as market was experiencing severe glut.
He stated, “At this point, we have seen a gradual easing of the situation. Those numbers of the uncommitted cargoes have gone down drastically and that’s why we see a gradual rise in prices in the last three to four days. It means that those uncleared transactions are now easing off.”
The GMD, also debunked reports making rounds in some quarters that Nigeria’s crude oil vessels were floating on the high seas because buyers were not available, stating that currently, no physical vessel offshore waiting for customers.
There were insinuations recently that an estimated 84 million barrels of Nigerian crude oil were stranded at sea as the country was short of storage due to low global demand and falling prices.
Some of the reports said cargo ships filled with Nigerian crude had “nowhere to go” while “a tanker was turned back from the US Gulf Coast, returning to the Canary Islands, where other Nigerian-hired ships are idle”.
But Kyari, who spoke with the media at the NNPC headquarters in Abuja, explained that the product was usually sold two months ahead, stressing that all crude oil transactions in the international market are done on paper ahead of time.
He said, “When you hear stranded cargo, it doesn’t mean crude oil that’s floating somewhere. Crude oil is always sold two months ahead and it’s on paper. Once you have that allocation or you have purchased the paper, it is now the business of the trader where to take it. They either take it to a refinery or to storage.
“So, anytime you hear there are stranded cargoes it means they have not decided whether to take it to storage or they have not found the refinery at that point in time. So, it’s not any cargo floating at anytime that everybody can see.
“And when you hear stranded cargoes now, we are actually talking about June. We are now in May. This crude oil has not even gone out of the ground. So, there are many decisions customers can make. They can decide now to ask for a shutdown so that the crude does not even come to the surface.
Consequently, the Nigerian government is already adapting to the current economic realities in relation to dip in crude oil prices.
The Federal Executive Council (FEC) approved the revised 2020 appropriation act and placed oil prices benchmark at $25 per barrel and crude oil production at 1.7mbpd.
This is against the earlier benchmark of $57 per barrel earlier proposed and approved by the National assembly.
