Ciao China,
Welcome South Korea and India!
PRICE MOVEMENT RECAP
Qua Iboe (Nigeria) – Light & sweet crude (Gravity 37.6 / Sulfur 0.10 %)
Nemba (Angola) – Light & sweet crude (Gravity 38.7 / Sulfur 0.19 %)
Price of Brent crude continues to plunge greatly and has fallen to its lowest point this year. It slumped as low as $59.26 a barrel last Friday (the 23th of November). In early October, the price per barrel was at $86, and then we can notice that this plunge is more than 30%.
As a result, OPEC will react as there is an oversupply of crude. Meaning that they will take initiatives by surely cutting the supply in order to regulate the market (stabilize prices). This would imply a rebound in prices in 2019.
SUPPLY & DEMAND
China’s Importation of WAF crude oil will be cut in November due to the higher cost of shipments, while South Korean imports from West Africa will increase because of the US sanctions againstIran. In fact, Iranian exports are falling, pushing Asian refiners to look out for oil from much more further with longer journey times, pushing up shipping costs.
“Shipping rates for carrying West African oil on a very large crude carrier (VLCC) to China hit a nine-month high in October of more than $50 000 a day.” (Reuters)
“West African loadings to Asia will fall to about 2.33 million barrels per day (bpd) this month, equivalent to 70% of total exports from Angola, Nigeria, Republic of Congo, Ghana and Equatorial Guinea. This compares to October’s 2.52 million bpd, or 75% of total regional exports.” (Reuters)
Consequently, the demand from Asian refiners for Nigerian and Angolan crude dropped down during the October and November, due to the higher shipping costs, which made the trip unprofitable.
Let’s have a look on West African exports to major Asian buyers:
Regarding tothis table, we can identify that China will import about 1.33 million bpd of mostly Angolan crude in November, comparing to October’s record of 1.935 million bpd, while South Korea will take about 167,000 bpd of WAF crude. India’s refiners will take 567,000 bpd of WAF crude in November, up from 452,000 bpd in October. Finally Taïwan has also increased its number of cargoes by taking about 133,000 bpd in November, while only 32,000 bpd were taken in October.
“South Korea has till now typically taken only occasional West African cargoes, because it has tended to rely more heavily on Middle East or North Sea suppliers. Nevertheless it has now said it would cut Iranian purchases because of US sanctions on Iran and has sought out other suppliers, starting with a cargo of Congolese Djeno that loaded this month.” (Reuters)
Glencore, Shell, Norway’s Equinor and Chevron, among others will supply the Indian market with a combination of Nigerian and Angolan grades.
BRENT FUTURES CURVE
When we compare the forward curve from two weeks ago to the one from this week, we can say that it is still a contango situation and hence it is still better to store the crude since carrying costs are supported by a higher price.
Only prices $ per barrel have been adapted but did not impact the forward curve. As the overall situation is the same from two weeks ago, in the sense that prices continues to plummet, there is no significant changes concerning this last bulletin to the previous one.
Sources:
https://oilprice.com/oil-price-charts