Oil price closed with strong gains
Oil bulls returned after several weeks of falling oil prices, with the looming Iran sanctions clearly having an impact on sentiment in the oil market.
For instance Oil prices closed out the weekend with strong gains, after several weeks of declines. The EIA data showing a steep decline in crude stocks helped push prices up on mid-week and return a sense of bullishness to the market.
“Both crude markers are on track to end a steady run of weekly declines. This is largely due to a tightening fundamental outlook on the back of looming Iranian supply shortages,” Stephen Brennock analyst at London brokerage PVM Oil Associates, told Reuters.
According to OilPrice.com, U.S. sanctions on Iran’s oil takes effect in November, but already countries around the world have been slashing purchases, which are affecting Iran’s exports. “Third-party reports indicate that Iranian tanker loadings are already down by around 700,000 bpd in the first half of August relative to July, which if it holds will exceed most expectations,” investment bank Jefferies said on Friday. “We expect that by Q4 the market will be dealing with undersupply, dwindling spare capacity – or both.”
Norwegian panel has advised against dumping fossil fuel investments. Norway’s $1 trillion sovereign wealth fund had proposed divesting from fossil fuel investments, but a government appointed commission has advised against the move.
“This investment strategy is simple, well founded and has served the fund well,” the commission report said. “If energy stocks are excluded from the fund, the composition of the investments will differ from market weights, and the fund will be expected to either achieve lower return or higher risk.”
There are also reports the Donald Trump administration which had previously scrapped plans to sanction Venezuela over fears of deepening the economic crisis, have returned the sanctions back on the table.
The report suggests that while the administration is considering the so-called “nuclear option” of banning purchases of Venezuela’s oil, the more likely scenario will be a narrower ban on the export of U.S. diluents to Venezuela. The move would make it harder for PDVSA to process its heavy oil. McClatchy reports that the administration is preparing options to be released within the next three months.
Another major development in the course of the week was that Aramco’s initial public offering may never happen, after four industry sources told Reuters that the company had disbanded its financial advisors on the listing. While Oil Minister Khalid al-Falih rejected the report, saying the Aramco listing was on track and a lot of the preparation work had been completed, the Reuters report is likely to deepen skepticism, since Falih also said that conditions for the listing had to be optimal, although he did not elaborate.
What was initially touted as the biggest IPO in the history of stock exchanges over the last year lost a lot of its spark as doubts began to emerge and then deepen that there will not be an international listing due to a number of challenges with financial transparency and the prospect of litigation in the United States following 9/11 legislation allowing U.S. citizens to sue Saudi ones.
Norway’s Petroleum Directorate revised upwards the estimated reserves of a new oil discovery that state energy major Equinor made recently in the North Sea. While Equinor’s initial estimate was of between 1.8 and 8.8 million barrels of crude, the NPD upgraded this to between 6.9 and 12.5 million barrels. The discovery is important as oil production in Norway is declining and the government is looking for ways to reverse the trend.
Crude oil output from the North Slope in Alaska could expand by as much as 40 percent over the next eight years, IHS Markit has forecast, noting the recoverable oil reserves of the area have recently swelled to more than 28 billion barrels of crude and 50 trillion cubic feet of natural gas thanks to new discoveries.
OLUSOLA BELLO