CL=F - Crude Oil Aug 20

NY Mercantile - NY Mercantile Delayed Price. Currency in USD
40.45
+0.16 (+0.40%)
As of 1:31AM EDT. Market open.
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Pre. SettlementN/A
Settlement Date2020-07-21
Open40.55
Bid40.43
Last Price40.29
Day's Range40.38 - 40.86
Volume21,553
Ask40.46
  • Oil Edges Higher on U.S Stockpiles Build and OPEC+ Compliance
    Bloomberg

    Oil Edges Higher on U.S Stockpiles Build and OPEC+ Compliance

    (Bloomberg) -- Oil edged higher after a report pointed to a drop in U.S. crude stockpiles and on signs that additional supply from OPEC+ next month won’t be as much as previously anticipated.Futures in New York traded near $40.50 a barrel after closing up 0.5% on Tuesday. The American Petroleum Institute reported that U.S. inventories fell by 8.32 million barrels last week, according to people familiar with the data. That would be the largest drawdown since December if confirmed by official figures due Wednesday, suggesting a supply glut is easing.OPEC+ is seeking compensatory production cuts in August and September from members that have missed targets in previous months, according to delegates. The proposal, which may temper the impact of the planned supply resumption, will be discussed Wednesday by the group’s ministerial monitoring committee.Crude has traded in a tight range around $40 a barrel this month as less supply and recovering demand is balanced by nervousness over a pandemic that’s still not under control in many parts of the world. A deterioration in relations between Washington and Beijing is also clouding the global economic outlook, with the U.S. announcing an end to Hong Kong’s special status on Tuesday.The tapering of the OPEC+ supply cuts is already priced-in, so isn’t likely to move the market much, said Howie Lee, an economist at Oversea-Chinese Banking Corp. Oil will probably remain around current levels for a while, but there’s a downside risk if the virus situation gets worse, he said.West Texas Intermediate for August delivery rose 0.5% to $40.48 a barrel on the New York Mercantile Exchange as of 11:37 a.m in Singapore. The contract finished at $40.90 on July 8, the highest close since March 6.Brent for September settlement climbed 0.5% to $43.10 after advancing 0.4% on Tuesday. The global benchmark’s three-month timespread was 63 cents in contango -- where prompt prices are cheaper than later dated contracts -- from 70 cents in contango on Monday. The market structure indicates that while there’s still some concern about over-supply, it’s eased slightly.An OPEC+ technical committee that met online on Tuesday outlined plans for countries including Iraq, Nigeria and Kazakhstan to make an additional 842,000 barrels a day of cuts over the next couple of months, the delegates said. The alliance is expected to announce that its overall curbs of 9.6 million barrels a day -- about 10% of global supplies -- will be relaxed from August.OPEC, meanwhile, expects demand for its oil to be back at pre-virus levels by next year. The Organization of Petroleum Exporting Countries forecasts the need for its crude will surge by 25% in 2021 to average 29.8 million barrels a day, higher than the level required in 2019, it said in a monthly report.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Oil climbs after sharp drop in U.S. crude stocks; OPEC committee meeting in focus
    Reuters

    Oil climbs after sharp drop in U.S. crude stocks; OPEC committee meeting in focus

    Oil prices rose on Wednesday following a sharp drop in U.S. crude inventories, with the market waiting for next steps from a meeting later in the day on the future level of output cuts by OPEC and its allies. Brent crude <LCOc1> futures were up 19 cents, or 0.4%, at $43.09 a barrel as of 0343 GMT, and U.S. West Texas Intermediate (WTI) crude <CLc1> futures rose 17 cents, or 0.4%, to $40.46 a barrel. Reflecting a recovery in fuel demand despite the coronavirus pandemic, U.S. crude inventories fell by 8.3 million barrels in the week to July 10, beating analysts' expectations for a decline of 2.1 million barrels, according to data from industry group the American Petroleum Institute.

  • OPEC+ May Temper Supply Restart With Extra Oil Cuts From Cheats
    Bloomberg

    OPEC+ May Temper Supply Restart With Extra Oil Cuts From Cheats

    (Bloomberg) -- OPEC+ is seeking extra production cuts from members that haven’t missed their targets again in June, potentially tempering the impact of the supply resumption planned by the wider coalition next month.A technical committee that met online on Tuesday outlined plans for countries including Iraq, Nigeria and Kazakhstan to make an additional 842,000 barrels a day of compensatory cuts in August and September, according to delegates.The proposal will be discussed on Wednesday by a ministerial monitoring committee led by Saudi Arabia and Russia, the delegates said, asking not to be named because the information isn’t public. They’re expected to announce the group’s overall curbs of 9.6 million barrels a day -- about 10% of global supplies -- will be relaxed in August as global fuel demand recovers.To prevent the supply increase from destabilizing a still-fragile market, Riyadh and Moscow are keen for the cartel’s laggards to make up for earlier cheating. On paper, full delivery of the compensation cuts could shrink the scheduled 2-million barrel-a-day supply increase by almost half.Yet it’s questionable how much of those reparations would delivered by those countries that still haven’t fully met their original commitments.“With Iraq, Kazakhstan, Nigeria and Angola all under-complying in May and June, these guys now need to over-comply to make up for the lost cuts,” Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd., said in a Bloomberg television interview.Last month, stragglers across the alliance agreed to make good on their lapses in May, which amounted to 1.26 million barrels a day.But the technical committee found that, while several had stepped up their efforts in June, they still missed the mark. Overproduction within the OPEC cartel amounted to a further 380,000 barrels a day last month, its data showed.With a second wave of infections hitting the U.S., signs of a renewed economic slowdown and oil-storage tanks still brimming, it’s no surprise that the cartel might want to act gradually.“The transition to higher production coincides with a move back to movement restrictions in populous U.S. states and other countries around the world,” said Louise Dickson, an analyst at consultant Rystad Energy A/S. “Where will the extra oil go now if people are ordered back to their homes to reduce the spread?”A monthly report published by the Organization of Petroleum Exporting Countries on Tuesday gives an insight into why, despite the ongoing economic slump, the cartel believes the easing is justified. Demand for OPEC’s crude is forecast to climb from here, and even surpass pre-virus levels in 2021.During the second quarter, when lockdowns aimed at containing the pandemic were at their height, demand for OPEC crude was barely half the level seen the previous year, at just 15.87 million barrels a day. But the group expects it will be back at prior levels above 30 million in the fourth quarter.“They are seeing the demand recovery that we all are,” said Sen of Energy Aspects. “It is the right time to start increasing production -- gradually, of course.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • China Books Record Deal for U.S. Corn, Stepping Up Buying
    Bloomberg

    China Books Record Deal for U.S. Corn, Stepping Up Buying

    (Bloomberg) -- China made its biggest purchase ever of U.S. corn in another boost to meeting agriculture targets set in the countries’ first-phase trade accord.The U.S. Department of Agriculture said Tuesday that exporters sold 1.762 million metric tons of corn, the fourth-biggest spot deal ever for the grain. The agency on July 10 reported a sale of 1.365 million tons to China.China is poised to meet or surpass import quotas set by the World Trade Organization for 7.2 million tons of corn from any country in a year. Beijing issued a new batch of permits that allow imports at lower tariffs. The Asian nation agreed to buy $36.5 billion in agricultural commodities this year from the U.S. as part of a trade accord, up from $24 billion in 2017.The buying spree of American agricultural products could help President Donald Trump shore up support from farmers ahead of the November election. The farm sector is crucial to maintain farm- and rust-belt states that carried him to victory four years ago.Farmers have received billions in aid payments after crop, meat and other farm-product exports declined in 2018 as the U.S.-China trade dispute worsened.“Right now, the purchases give the president something concrete to talk about in helping Corn Belt crop farmers, but I think the impact politically is pretty marginal at this point,” University of Illinois agriculture economist Scott Irwin said in a message.Tensions were also flaring between the U.S. and China, potentially threatening the trade accord.At a press conference at the White House Tuesday, Trump said he issued an order to end Hong Kong’s special status with the U.S. and signed legislation that would sanction Chinese officials responsible for cracking down on political dissent in Hong Kong. He added he has no plans to speak to Chinese President Xi Jinping.Trump also noted there have been increased Chinese agricultural purchases.“A lot of people ask, how are they doing on the trade deal?” Trump said. “Well, they’re buying a lot.”That follows Trump’s statement last week that he wasn’t considering a second phase to the trade deal.Former National Security Adviser John Bolton asserts in his new book that Trump personally urged the Chinese leader in 2019 to help him win re-election by buying more farm products.For American farmers, ample grain supplies, lackluster demand and relatively benign weather for crops have pressured prices for Chicago corn futures, despite the record sales to China.“The key is whether the purchases lift grain prices off of recent lows for a sustained period of time,” Irwin said. “This looks to be tough to do right now because rains are improving the outlook for yields at the same time.”Stocking UpChina’s imports of other raw materials from crude oil to soybeans surged in June as the economy started to recover from the worst of the virus.In the U.S., virus cases are rising, and commodity markets are under pressure from limited demand for feed and fuel. The huge export sales have a more modest impact on corn futures than normal with grain inventories rising faster than consumption.“China would need to buy five times this amount just to get us close to the carryover we currently have,” said John Payne, a senior futures and options broker at Daniels Trading in Chicago. “This is a positive development, though.”Corn futures for September delivery fell 0.8% to $3.26 a bushel on the Chicago Board of Trade, extending the loss over the past three sessions to 6.5%.Sinograin, which handles China grain inventory, sent a team to the northeastern city of Zhaodong in Heilongjiang province on Sunday to investigate quality issues related to local corn reserves.The three biggest U.S. corn export sales: 3.72 million tons in January 1991 and 2 million in October 1989, both to the former Soviet Union, and 1.86 million to unknown destinations in July 1979.(Updates with Trump order on Hong Kong status in eighth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Oil Gains With OPEC Compliance Overshadowing U.S. Demand Fears
    Bloomberg

    Oil Gains With OPEC Compliance Overshadowing U.S. Demand Fears

    (Bloomberg) -- Crude futures rose as initial signs that OPEC members intend to comply with promises to curtail production eclipsed fears that a resurgence in coronavirus cases would send demand back to the worst days of the pandemic.Saudi Arabia commended Iraq for implementing almost all its pledged oil-production cuts, and Nigeria told the kingdom it was committed to hitting its target, in further signs that disputes among OPEC+ members over cheating of quotas are being resolved.“It’s all about risk appetite and the hope of continued demand growth here,” said Bart Melek, global head of commodity strategy at TD Securities. Iraq and Nigeria pledging to “to live up to their supply cut commitments made investors comfortable to take a long stance on oil.”Oil has been stuck in a rut after staging a months-long rally from historic lows in April. A wave of new coronavirus cases sweeping the U.S. has spurred concerns over a recovery in gasoline demand.“We’ve been in a market that’s been in clear consolidation for quite some time,” said Thomas Finlon of Houston-based GF International. “After a considerable rally or selloff, the interesting thing is the market seems to be drawn back to unchanged on the day pretty quickly.”Figures from the American Petroleum Institute showed U.S. crude stockpiles decreased 8.32 million barrels last week, but supplies in Cushing, Oklahoma, rose 548,000 barrels. The market is turning its attention to Wednesday’s U.S. Energy Information Administration inventory report.“If crude oil storage posts a new all-time record, with a build at Cushing thrown in for good measure, I would tend to think the market would trade lower… possibly sharply lower,” Bob Yawger, director of the futures division at Mizuho Securities USA, said in a note to clients.In the longer-term, OPEC expects demand for its crude to rebound next year, surpassing levels seen before the pandemic, as rival producers struggle to revive output. An OPEC+ committee meets Wednesday to discuss easing record supply curbs that have helped the market recover. OPEC+ is expected to stick with plans to taper the cuts from August even as the virus rages in many parts of the world.The OPEC+ committee will consider whether the alliance should keep 9.6 million barrels of daily output off the market for another month, or taper the cutback to 7.7 million barrels as originally planned. Members are leaning toward the latter option, according to several national delegates who asked not to be identified.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • OPEC+ News Is Holding Oil Prices Back
    Oilprice.com

    OPEC+ News Is Holding Oil Prices Back

    Expectations of an easing of OPEC+ production cuts are keeping oil prices in check, despite an improvement in demand projections

  • Eni to Exit Traditional Oil Refineries in Next Decade
    Bloomberg

    Eni to Exit Traditional Oil Refineries in Next Decade

    (Bloomberg) -- The coronavirus pandemic will accelerate Eni SpA’s pivot away from conventional refineries to investing in greener facilities.“Instead of slowing down, we see Covid as a reason to accelerate the transition to low-carbon energy,” Chief Executive Officer Claudio Descalzi said in an interview on Monday.In February, Eni set tougher climate goals, in which the Italian energy giant pledged to slash net emissions by 80% by 2050. Less than two weeks later, Italy became the first European country to impose a lockdown to curb the spread of the coronavirus. Country after country followed, sending oil demand and prices tumbling.While consumption of gasoline and diesel in the country is now recovering, Eni’s biorefineries haven’t been affected by the pandemic. Its two plants -- Venice and Gela -- were the only ones in its refining system that did not reduce production during Italy’s lockdown as they “worked very well,” Descalzi said.Along with its European peers, Eni slashed spending plans and cut a 400 million-euro ($455 million) share buyback, but has so far left its dividend intact. Investors and analysts have questioned how European oil majors will pay for the energy transition they’re promising, as renewables typically have lower returns than oil and gas projects.Bio-ReturnsDescalzi remains optimistic. Biorefineries have an internal rate of return of 15%, which is “not bad” compared with upstream, he said. Originally, the company had planned to fund its new renewables projects with free cash flow from oil above $50 to $60 a barrel.Following the pandemic’s impact on prices, the company is now looking for new ways to finance projects. While securing capital for green projects will be different, “access to funds will be easier.”Eni’s biorefineries currently use less than 80% palm oil as feedstock, while the remainder is a mix of cooking oil and other unconventional and advanced feedstock. By 2023 the company aims to replace palm oil with more sustainable and advanced raw materials such as castor oil and waste products, which offer higher margins, Descalzi said.Eni plans to spend 4.9 billion euros between 2020 and 2023. With oil at around $40 a barrel, “we won’t cut low-carbon spend, instead we will be cutting oil and gas” capex by 35% to 40% this year, Descalzi said.The CEO expects Eni will exceed its initial climate ambition, saying the company will now “match Europe’s goal of reaching net-zero emissions by 2050, across Scope 1, 2, and 3.” This would cover emissions from its own operations as well from the use of its products by customers.Beyond converting refineries into biorefineries, the company will look to divestments as part of its emissions-reduction plan. Eni expects to sell marginal activities in some countries including “maybe the U.S.”(Adds further details in seventh paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Gold Price Forecast – Gold Markets Continue to Show Resilience
    FX Empire

    Gold Price Forecast – Gold Markets Continue to Show Resilience

    Gold initially sold off on Tuesday but found enough buyers to turn around and form a hammer. There are plenty of fundamental reasons for gold to go higher.

  • GBP/JPY Price Forecast – British Pound Tests 50 Day EMA Against Yen
    FX Empire

    GBP/JPY Price Forecast – British Pound Tests 50 Day EMA Against Yen

    The British pound fell during the trading session on Tuesday, testing the 50 day EMA against the Japanese yen. By doing so, it did in fact find some support.

  • Oil & Gas Stock Roundup: Eni's EUR 3.5B Impairment, BP's Reliance Deal & More
    Zacks

    Oil & Gas Stock Roundup: Eni's EUR 3.5B Impairment, BP's Reliance Deal & More

    Italy's Eni SpA (E) to announce a EUR3.5 billion write-down, while British major BP plc (BP) shelled out $1 billion to India's Reliance Industries for a 49% stake in its retail fuel business.

  • U.S. Stocks Mixed As Traders Focus On Banks’ Earnings
    FX Empire

    U.S. Stocks Mixed As Traders Focus On Banks’ Earnings

    S&P; 500 futures are gaining ground in premarket trading session as JPMorgan and Citigroup easily beat earnings expectations.

  • OPEC Sees Demand for Its Crude Above Pre-Virus Levels in 2021
    Bloomberg

    OPEC Sees Demand for Its Crude Above Pre-Virus Levels in 2021

    (Bloomberg) -- OPEC expects demand for its crude oil to rebound sharply next year, surpassing levels seen before the coronavirus crisis, as rival producers struggle to revive output.The Organization of Petroleum Exporting Countries forecasts the need for its crude will surge by 25% in 2021 to average 29.8 million barrels a day, higher than the level required in 2019, according to a monthly report.While the increase is partly driven by a recovery in global oil demand as economic growth resumes, an even bigger factor is the misfortune of OPEC’s competitors. After slumping 7.4% this year, the U.S. will see only limited production growth in 2021, the report showed.In the meantime, OPEC and its allies are cutting production to clear the glut left behind by the Covid-19 crisis and prop up prices. The cartel said it implemented more than 100% of the cutbacks pledged in June.The OPEC+ alliance, which includes non-members such as Russia, is expected to announce at a meeting on Wednesday that it will phase out some of the curbs from next month. Under the terms of its agreement, the cuts taper from 9.6 million barrels a day currently -- roughly 10% of global supply -- to 7.7 million a day in August.World oil demand will rebound by 7 million barrels a day, or 7.7%, next year to average 97.72 million a day, OPEC said in its first detailed assessment of the market in 2021. Still, even that is below the levels seen last year or in 2018, and the growth hinges on the containment of the coronavirus and a recovery in the hospitality and travel sectors.The organization lifted estimates for demand in 2020 very slightly, by 100,000 barrels a day, projecting that consumption remains on track for a record annual slump of 8.95 million barrels a day.For the improvement in the group’s fortunes next year, a more important driver is the suffering of its rivals.Non-OPEC supply is set to plunge by a massive 3.26 million barrels a day in 2020, and will rise by only 920,000 barrels a day the following year. It could represent a period of breathing space for an organization that saw its market share eroded for much of the last decade by American shale drillers.OPEC’s estimates form a more optimistic outlook for the cartel than that published last week by the International Energy Agency, the Paris-based institution that advises consuming nations. The IEA predicted that demand for OPEC crude, while set to recover sharply, will remain slightly below 2019 levels next year.For the time being, the organization is committed to supply restraint, which has helped prices more than double from the lows hit in late April, to current levels of about $42 a barrel in London.Last month the cartel slashed output by a further 1.89 million barrels a day to 22.27 million barrels a day, as Saudi Arabia followed through on promises of extra cutbacks and other members stepped up their compliance with pledged reductions. A committee that assesses implementation meets later on Tuesday, ahead of a ministerial gathering Wednesday.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • OPEC+ Risks Triggering Another Oil Price Slump
    Bloomberg

    OPEC+ Risks Triggering Another Oil Price Slump

    (Bloomberg Opinion) -- OPEC+ oil ministers face a tricky decision when they meet on Wednesday to assess progress in the alliance’s unprecedented output cuts and recommend the next step in its attempt to rebalance the oil market and drain excess inventories. Get the decision wrong and they could send oil prices tumbling again.This week’s meeting of the panel that reviews OPEC+’s progress won’t decide policy — that has to be done by the unanimous agreement of all the ministers. But it will make a recommendation and, with Saudi Arabia and Russia co-chairing the get-together, whatever they suggest is likely to become policy. So tomorrow’s meeting matters.The original deal, painfully achieved in April, saw an output cut from agreed baseline production levels of 9.7 million barrels a day for May and June, followed by a tapering of the reduction. At a virtual meeting on June 6, the deepest cuts were extended for another month, through the end of July. Now ministers must decide whether to recommend prolonging them again, or allowing the group’s members to start reopening the taps.For several reasons, the most likely outcome is that they will opt to ease the cuts in August.First, global oil forecasts are more optimistic about demand than they were when the group last met in early June.The slump in demand in the just-ended second quarter doesn’t look quite as bad as it did. For the year as a whole, global oil demand is now seen nearly 1 million barrels a day higher than where expectations were when the full OPEC+ group last met. With the worst of the demand destruction now past, it makes sense to start easing the output cuts put in place to deal with it.Second, producers are already starting to implement the tapering. With allocations of August cargoes now underway, several producers, including Russia, have already factored an easing of the output cuts into their production and loading plans. It will be difficult at this late stage for them to reverse that process.Third, having made a production plan that, in theory, runs to the end of April 2022, constantly revising it may be seen as indicating a lack of resolve on the part of the producers. This certainly seems to be the view from Moscow, where Russian Energy Minister Alexander Novak said earlier this month that to create a sense of stability, it would be good if OPEC+ “changed our decisions as little as possible, at least in the mid-term period, for several months.”Finally, OPEC+ countries see U.S. oil companies reopening some of the wells that they shut during the depth of the first wave of the Covid-19 pandemic. Although that isn’t yet translating into a recovery in U.S. production, it has brought the drop there to a halt, according to weekly data from the U.S. Energy Information Administration. OPEC+ producers will be reluctant to concede even more market share.But starting to taper the output cuts is not without its risk. The Covid-19 pandemic is far from over and a resurgence of infections — met with further restrictions on movement and social gathering, for work or pleasure — could quickly undermine the recovery in oil demand. The rise in oil consumption is already beginning to falter. Data from the TomTom Traffic Index show congestion on city streets stabilizing at levels well below last year’s averages, while commercial flights remain at about half the level they were in January, even as the start of summer holidays in Europe and North America would normally be pushing them higher.And then there’s the question of just how far economies will recover. The list of companies laying off thousands of workers, or closing down completely, gets longer every day, while worker-retention schemes, such as the bonus offered by the U.K. government to encourage firms to bring back furloughed employees, are either being shunned, or are expected merely to delay, rather than prevent, lay-offs.The other issue is timing. Crude loaded onto tankers in the Persian Gulf in August will start to arrive off the U.S. coast in mid-September, after summer’s over and as refiners begin their autumn maintenance work ahead of winter. Add to that a waning Chinese thirst for crude — shipments from Saudi Arabia and Iraq to the world’s biggest oil importer fell by 1.4 million barrels a day from May to June and some tankers have been waiting for weeks off Chinese ports to discharge their cargoes. Additional OPEC supplies could hit a wall of indifference from buyers who stocked up on ultra-cheap crude in April and May and still have brimming tanks.The one thing working in the producers’ favor is that the actual increase in output may be nowhere as big as the headline figure of 2 million barrels a day. About half that volume seems more likely, as long as Iraq, Nigeria and the others actually deliver on their promises to make up for their failures to cut as much as they pledged in May and June with deeper cuts from July through September.There’s a lot riding on the ability of Iraq and Nigeria to deliver the compensatory cuts they promised — and they don’t have good records of complying with OPEC output targets. But they seem to have convinced Saudi Energy Minister Prince Abdulaziz Bin Salman that their promises are genuine.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Julian Lee is an oil strategist for Bloomberg. Previously he worked as a senior analyst at the Centre for Global Energy Studies.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • China’s Record Oil Import, OPEC’s Plan to Boost Crude Oil Production
    FX Empire

    China’s Record Oil Import, OPEC’s Plan to Boost Crude Oil Production

    The world’s second-largest economy, China’s most recent data on crude oil importation showed a record high in the previous month despite growing concerns that the Chinese leadership imposed economic restrictions particularly in regions hit by COVID-19 resurgence.

  • No Love for Pound as UK Growth Disappoints
    FX Empire

    No Love for Pound as UK Growth Disappoints

    Sterling weakened against the Dollar and most G10 currencies on Tuesday morning after UK economic growth figures massively undershot expectations by increasing a tepid 1.8% in May versus the 5% forecast.

  • Modi’s Fuel-Tax Hikes Are Putting Brakes on India’s Recovery
    Bloomberg

    Modi’s Fuel-Tax Hikes Are Putting Brakes on India’s Recovery

    (Bloomberg) -- Dilip Lamba, who owns a transport company in Jodhpur in western India, has had more than three-quarters of his fleet of 50 trucks idling for months. Dharampal Nambardar, a farmer who grows wheat and mustard seed in Haryana state, is worried he might not make any profit this year.The main source of their anxiety is not Covid-19, however, but rather a surge in fuel prices. The central government has hiked import and excise taxes twice this year even as it imposed the world’s biggest coronavirus lockdown. Retail prices for diesel -- the lifeblood of India’s economy -- in the capital New Delhi have jumped 30% since the end of April, while gasoline has risen 16%.“Diesel makes up almost 70% of our operating costs,” said Lamba, whose company carries everything from cotton to cement to leather goods all over India. “Higher diesel prices means higher freight charges. But customers aren’t ready for it and we can’t absorb the costs.”The central government raised levies on diesel and gasoline in March and then again in early May as the coronavirus battered the economy. There’s been a staggering fivefold increase in taxes on diesel since 2014 when Prime Minister Narendra Modi came to power, while those on gasoline have more than doubled. State governments also impose fuel levies, which in Delhi state account for around a quarter of the retail prices.Taxes on the two fuels now account for almost two-third’s of what Indians pay at the pump, making Indian retail prices among the highest in Asia and almost double that in neighboring Pakistan. The recovery in global crude prices, meanwhile, has boosted Indian fuel costs even further in the last few months.The high prices are adding another headwind to an economy facing the biggest contraction in four decades. Diesel powers India’s trucking fleet, which carries two-third of the country’s freight, and is also essential for construction and agriculture. Gasoline, meanwhile, fills the tanks of millions of motorbikes ridden by lower-income Indians.“While pump prices across the world have mostly followed the drop in oil prices since last year, India is an exception,” said Senthil Kumaran, a senior oil analyst at industry consultant FGE. “It’s unusual to see such a steep increase in the taxes on diesel, as the fuel is deemed to be a driver of economic growth, especially in rural areas.”There appears to be little chance that Prime Minister Modi will take steps to curb the rising diesel and gasoline prices even as global crude prices recover. This year’s fuel levy increases are expected to generate about $30 billion a year in revenue for the government, according to Bloomberg Intelligence, at a time when coffers are being squeezed by less income and sales tax and higher spending on welfare programs.“The tax hike in early May is turning into a wider cost-push supply shock, reinforced by a rebound in global crude oil prices,” Abhishek Gupta, India economist at Bloomberg Economics, said in a note. That’s likely to push up inflation over the next few months, he said.With industrial production still fragile as Covid-19 continues to spread in India, Oil Minister Dharmendra Pradhan’s prediction last month that fuel demand will be back to pre-virus levels by September is looking tough to achieve.There’s already evidence that the high prices are curbing demand. Provisional fuel sales in June show that while India’s overall consumption of petroleum products was 8% lower than a year earlier, diesel and gasoline consumption were down 15% and 14%, respectively.“The cost of operations has increased exorbitantly and small truck operators are unable to pass it on to the consumers because demand is low,” said Kultaran Singh Atwal, chairman of the All India Motor Transport Congress, the largest such grouping in the country. Almost half of India’s truck fleet is still idle, he said.(Updates with new chart below 2nd paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Dirty Oil Gets More Pricey as Major Producers Bank on Asia
    Bloomberg

    Dirty Oil Gets More Pricey as Major Producers Bank on Asia

    (Bloomberg) -- Middle East producers are banking on robust demand from Asia for its more sulfurous and dense crude, boosting prices for the dirtier oil even as OPEC+ considers loosening cuts that would increase supply.Iraq and the U.A.E. -- two of the biggest OPEC producers -- along with Qatar increased their official selling prices of so-called medium-sour varieties for August from a month earlier. Asia has some of the world’s most sophisticated refineries that are tailored to process this type of crude, which has become more popular than lighter grades that yield a lot more jet fuel and diesel.Medium-sour crude has also faced a supply squeeze, with cuts from OPEC+ adding to curbed volumes from Venezuela and Iran. While there’s greater supply of less sulfurous grades, there’s also less demand for these distillates-rich varieties due to the crash in consumption, particularly for jet fuel.“In a low demand and weaker margin environment, refiners will be especially value-driven on feedstock selection and less inclined to run lighter grades,” said John Driscoll, chief strategist at JTD Energy Services Pte in Singapore. “Higher sulfur crude from the Middle East would offer better value for Asian refineries that have the complexity and scale.”See also: Saudis Meet Some Oil Buyers’ Requests Ahead of OPEC+ PanelIraq set its August medium-sour Basrah Light at a $2.10 a barrel premium to the Oman-Dubai benchmark for Asia, the highest level in six months, while Abu Dhabi priced its Upper Zakum crude at a 20 cents a barrel premium to its Murban grade after being set at a parity in July. Qatar Marine was also priced at a small premium over the lighter Qatar Land for cargoes loading next month.The spot market has already started to reflect the supply-demand dynamics. Iraq’s state-owned oil marketer SOMO sold Basrah Light at about 90 cents a barrel above the grade’s official selling price last month, while Abu Dhabi’s light-sour Murban traded as low as an 80 cents a barrel discount to its OSP.See also: In The Physical Oil Market, Sour Barrels Trade at Sweet PricesMurban is a distillates-rich grade with American Petroleum Institute gravity of about 40 degrees and 0.7% sulfur that’s typically more popular when there’s higher industrial demand, whereas Basrah Light -- with API gravity of about 30 and 2.9% sulfur -- yields more residue that can be converted into valuable fuels such as gasoline via a cracking process in the plant’s secondary units.Meanwhile, OPEC+’s Joint Ministerial Monitoring Committee will meet Wednesday to assess whether the 23-nation alliance should keep 9.6 million barrels a day of output off the market for another month, or restore some supplies as originally planned and taper the cutback to 7.7 million barrels a day.(Updates with grade details in seventh paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Investing.com

    Oil Inventories Fell by 8.3M Barrels Last Week: API

    Investing.com - U.S. crude stockpiles crude inventories fell by 8.3 million barrels last week, according to an estimate released Tuesday by the American Petroleum Institute.