Apr Newsletter 2021: Oil Market Review

Apr Newsletter 2021: Oil Market Review

BRENT CRUDE APROil prices remain supported despite India’s worsening COVID outlook.

Finally! Two more weeks to my cruise! I can enjoy a couple of days off, sitting on the faux beach that is my cabin balcony and enjoying the genuine sea breeze. A little isolation from the bustling and gradually dwindling activities in the mainland and pretend to be unavailable at work due to poor ship Wi-Fi. Seems things are finally looking up.

While things have been looking up in Singapore, elsewhere in the world, COVID continues to rampage across communities. The focus right now is the growing pandemic in India. As the world’s third-largest oil consumer, it was a major factor in the oil demand recovery story. However, the country’s worsening pandemic outlook has made that look bleak. COVID infection cases averaged into the high 300,000s per day towards the last week of Apr21 with no signs of slowing down, along with deaths per day trending towards high 2,000s. Despite record infections, the central government has still resisted calls for a nationwide lockdown, leaving the decision to individual states that applied different levels of restrictions. India’s oil demand declined almost 0.47mbpd in 2020 during the initial wave of the pandemic. 2021 was meant to be a year of recovery but the wave has dampened the outlook. Analysts’ projections for demand recovery have already been adjusted down by 10% to 0.40mbpd for 2021 and might fall further depending on the evolving situation in India.

The worsening outlook in India is now also a consideration for the OPEC+ group. The group was counting on a surge in demand recovery to support oil prices and allow for some pullback in output cuts. This would especially be jarring to Saudi Arabia who has volunteered an additional 1mbpd cut in Jan21. The group planned to gradually add 350kbpd of production in May21 and another 350kbpd in Jun21 and a further 450kpbd in Jul21. Saudis also stated that they want to start reducing their voluntary cuts in May21. With the worsening crisis in India and escalating rates of infection in Japan and Turkey, Saudi may have more to contemplate come the next OPEC+ meeting.

On the other hand, there was temporary support for prices as Libya’s Hariga oil port declares force majeure earlier this month due to a financing dispute between Libya’s national oil company and the ruling government. It was settled within a week on a US$225 million settlement. This incident is only the tip of the iceberg for Libya’s oil industry. It has recently attempted to revive its oil production after a decade-long civil war. It has managed to build up its production to 1.3mbpd, an 8-year high, and only 300kbpd lower than before conflict erupted. However, due to budgetary issues, it has since dropped to 1.0mbpd. Given that oil prices have recovered to pre-COVID levels since Feb21, Libya should be minting money from its oil industry. I am certain I must be missing some critical detail here, but it sounds like they ran out of budget to print more money. Quite unfathomable if you ask me.

Globally, it seems like the second wave of infections is coming under control with various vaccines being rolled out continues across multiple countries. The global economy seems to be picking up as well so if the optimism is anything to go by we might be out of the woods sooner than it seems.

USEP APRVolatility returns in Apr21 on outages and strong demand.

Energy demand continues to recover as Singapore somewhat returns to normal. Average demand is up to 60MW from the previous month or about 1%. Bouts of volatility continue to persist through the month on generator outages and demand recovery. It’s always necessary to be cautious with power markets.

Meanwhile, iSwitch has launched our One-Stop Green Shop initiative where it’s possible to get Solar Panels, Electric Vehicle Chargers, and Batteries installed in your home and get Green Financing through our partner DBS. It’s a win-win situation; help save the environment with a lower upfront cost! I have started thinking that if I were to get a car (not that I can afford one now but one day!) I will probably get an electric car. With the government’s plan to install 60,000 chargers, it’s probably as convenient as normal cars if not more convenient if you can skip those trips to the petrol station.

Dreams aside, I’m off to stare at saltwater for 4 days!

 

Zheng Tianbai
Analyst, Oil & Power
Written on 30th Apr 2021

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