Weekly Economic And Financial Commentary – August 10, 2020
Iraq, the OPEC+ alliance’s third largest producer, pledged to make additional cuts of 400,000bpd below its quota in August and September to make up for its overproduction in May, June and July. This would put Iraq’s effective quota at 3.404mbpd compared to the original quota of 3.804mbpd from August through the end of the year. The EIA’s weekly US Petroleum Report released last week showed commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) declined by 7.37 million barrels to 518.6 million barrels, which is about 16% above the five-year average. As a result, oil prices increased last week by 2.02% to $44.4/barrel – trading above $45/barrel – trading above $45/barrel during the week. The price at the end of last week reduced the year to date decline to 34.5% and is 58.6% above the Federal Government of Nigeria 2020 revised budget benchmark of $28/barrel. In line with the expected increase in volumes from OPEC+ exporters following agreed quota of 7.7mbpd starting August (compared to 9.7mbpd in May to June), Saudi Aramco lowered its official selling prices (OSP) for September crude supplies to Asia, dropping the Asia OSP for Arab Super Light and Arab Extra Light by $0.60/barrel and $0.50/barrel respectively from July to the Dubai/Oman average, and dropping its Arab Light and Medium prices by $0.30/barrel from August. Arab Heavy OSP was lowered by $0.30 cents/barrel.
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