Final week, Brent oil suffered a ten.3% loss and was down 8.5% in October as COVID-19 instances preserve hovering. Demand is getting crushed and consumption would quickly observe, as main nations in Europe start lockdown. Nearly all of Nigerian oil patrons are in Europe and with imminent lockdowns, we would face a possible state of affairs the place oil income would decline.
With oil demand in Europe being affected, international oil inventories are falling at a price of round 2 million barrels a day in September and October and that decline will in all probability proceed, in keeping with Mike Muller, the Head of Asia for Vitol Group.
“We’re seeing demand destruction unexpectedly from these lockdown measures – a whole bunch of hundreds of barrels-per-day-equivalent for Europe alone,” he mentioned. “However the greater, overriding image continues to be that the world is in a stock-drawing mode.”
The forthcoming United States election poses one other risk to Nigeria’s oil fortunes. A win for Trump may go away issues unchanged, though the ever-growing presence of the shale business which presently suffers from poor revenue margins and capital expenditure might have an effect on Nigeria.
Alternatively, a win for Joe Biden may sign the decline of the American Oil business. Though, this is perhaps offset by the return of Iranian oil, as Joe Biden’s diplomatic relations with Iran may take away sanctions imposed by Donald Trump.
Joe Biden has vowed to ABOLISH American Oil and Pure Fuel. As we speak I signed an order to strongly shield Pennsylvania’s power & fracking business. If Biden & Harris get in, they may terminate this order and implement the Inexperienced New Deal. Get out and VOTE! https://t.co/gsFSghkmdM pic.twitter.com/VJMr2IeIgo
— Donald J. Trump (@realDonaldTrump) November 1, 2020
Moreover, the USA set one other Covid-19 record final week Friday, as they recorded greater than 100,000 instances. These statistics convey the overall variety of coronavirus instances in the USA (one of many largest customers of oil) to 9 million instances.
Talking of huge customers, Nigeria has hope within the enchancment of demand from China and one in every of Nigeria’s frequent oil patrons, India. There have been reports that each nations have had financial exercise choose up and this is perhaps the one bullish sign for oil.
In distinction, the oil bears have all the required impetus to convey costs down. After costs had already hit the June low, there’s a risk that costs may goal one other assist degree. The catalysts to drive this embrace the buildup up of Crude draw within the U.S (one of many largest oil producers), as reported by the E.I.A final week.
Secondly, the upcoming lockdowns in Europe and the fast rise of coronavirus instances which sign the destruction of demand would give the bears extra drive. As well as, the bears shall be motivated by the uncertainty of the outcomes of the USA election, which alerts a delay within the stimulus invoice (which has supplied oil markets assist for the previous few months).
Nigeria would want her allies in OPEC+ to push ahead their assembly, initially slated for the ending of November/begin of December. The bears have on a regular basis to trigger carnage within the oil markets and OPEC+ can’t afford to observe costs run down earlier than the assembly.
The return of Libyan oil, which experiences counsel is constructing momentum, poses one other headache for Oil bulls. Libya is an OPEC+ member and residential to Africa’s largest crude reserves. Nevertheless it’s exempt from the group’s provide cuts initiated in Might because the coronavirus pandemic stifled economies induced oil costs to tank.
With potential shortages in oil income coming, FX liquidity would stay as it’s. Scary because it sounds, this may go on until 2021, as all of the vaccine speak appears to have gone out the window. It simply appears that Nigeria and Nigerians is perhaps in for an extended Halloween.