Rapid growth in the number of Covid-19 infections worldwide is taking oil markets to take for granted that the pandemic is back and going strong, knocking the barrel of Brent (London) below the 40 USD threshold. , which hasn’t happened in weeks. Meanwhile, João Lourenço’s Executive refines the aim and reduces the barrel reference value to 33 USD in the OGE 2020 under review. And BP – one more consequence of the crisis – shows signs of reevaluating its presence in national “ultra-deep” waters.
One of the immediate effects of increased infections in the world’s largest economies, which is precisely what is happening in countries such as the United States, China, Brazil or India, but also in Germany, is the decrease in consumption of crude, generating an increase in stocks, which is one of the first indicators of the health of these economies.
And that of the USA, in particular, because it is the most robust in the world and the one that consumes the most raw material. Now, US stocks have been rising for at least three consecutive weeks, according to data from the American Petroleum Institute and the International Energy Agency, although there is a loophole to deflate this negative effect on the value of the barrel, both in the New WTI. York, as in London’s Brent, which is where the average values of Angolan exports are defined.
This gap is the possibility that the growth of stocks in the USA is a direct result of the arrival of dozens of cargo acquired by the North American industry in April, taking advantage of the “balances” that oil was in – always because of the pandemic crisis -, having even reached negative values in New York, which, if confirmed, will soon stop contributing to the increase of crude reserves in the largest planetary economy.
However, several analysts today are pointing to an extra factor of restraint in refined consumption, first of all gasoline, which is the resurgence of Covid-19 vacancies in the USA, Asia and South America, or even in Europe, which is the slippage of “confidence” that leads to the dilution of the effect of the recovery in sectors such as commercial aviation or, still, the return to restrictive measures with severe economic impact such as confinements to halt this new expansion of the pandemic.
Brent, in London, was worth today, close to 10:00, slightly above 40 USD, 40.26 USD more precisely, falling 0.40% compared to Wednesday’s closing, but at the opening, it hit at 39.6, then starting a slight recovery, which is a good indication for Angolan exports.
This is because, according to data from Wednesday’s meeting of the economic commission of the Executive of João Lourenço, the revision of the General State Budget (OGE 2020) that was aimed at revising the reference value of the barrel to 35 USD , after all, it will put this figure at 33 US dollars, leaving a slightly higher margin for the management of the national debt.
This review of the OGE 2020, whose main line is that the value of revenues is equivalent to expenses, 10.4 billion kwanzas, according to the meeting statement quoted by Angop, as a result of the adjustment of the value of the barrel to 33 USD, which led to a reduction in this amount, which was initially more than 15.9 billion, and the barrel with a reference value of 55 USD.
This readjustment was the result of the pressure inherent to the overwhelming dependence of the Angolan economy on oil exports, which are more than 90% of the global value of national exports and about 40% of national GDP and, it reads in the same press release, results from the “need adjustment of the current value of income and expenses “to the world economic reality that is characterized by the tremendous impact of the Covid-19 pandemic, which, for example, has removed more than 40 percent of the value of the barrel so far, but which has been 70% at the end of April.
But the Executive had already admitted that the review of the OGE would always take into account the global context and, in the first line, the value of the barrel in the reference markets for the national branches, whose production has been losing strength due to the crisis worldwide – less demand -, and the agreements that Luanda signed in the scope of its participation in OPEC, which, together with other Russian-led producers, in OPEC +, has a cut in production of 9.7 million barrels per day to balance the markets.
Defense is the best offense …
These readjustments underway in the national economic panorama, where crude oil is still king and lord, emerge from a context where the year 2020 should remain in the history of the oil industry as the one that recorded the biggest drop in global crude consumption ever, as the International Energy Agency (IEA) advanced this week in its latest report on oil markets.
This Agency, the most comprehensive body in monitoring world oil fluctuations, estimates, however, that after the tragic year of 2020, the miraculous year of 2021 will follow, for which the IEA points to a “historic recovery “, even the most pronounced ever since there was an oil industry.
In this document, where the IEA periodically analyzes the evolution of the hydrocarbon markets, it is emphasized that 2020 will see an average daily drop of 8 million barrels per day.
However, for 2021, a daily average increase of 5.7 million barrels per day is in line with this IEA guide.
And you, BP?
Sentiment that is contradicted by the world giant, BP. In yet another negative indicator for the national oil sector, according to Reuters, this multinational is revising its estimates and has just reduced its Outlook from 70 USD to 55 per barrel in the long term, which puts its investments in Angolan deep waters, where it has assets worth around US $ 1.5 billion.
Therefore, according to this agency, heavy adjustments of BP should occur in Angolan national waters, with a decrease in activity due to the high breakeven, which is above 45 USD per barrel.
This British multinational is, in addition to Angola, also reevaluating its business in Canadian tar sands, for the same reason as in national ultra-deep waters and also due to the heavy environmental effects of exploration.
It is present in four maritime blocks in ultra-deep waters located about 200 kilometers off Luanda, according to its official page, with no evidence that in other areas where it has a presence, such as at the Soyo LNG production unit or other blocks.
All because of the pandemic
Behind this rise and fall is clearly the global economic crisis generated in the wake of the Covid-19 pandemic caused by the new coronavirus that was first detected in December 2019 in the Chinese city of Wuhan, and which, in a few weeks, spread to virtually every country in the world, and today it is especially active in countries like the USA, Brazil and other Americans, although China has come back into focus these weeks after discovering a potentially disastrous outbreak in Beijing. As the Novo Jornal also reported.
The IEA admits that, since 2020 is crossing the semester line, however, the effects of the measures taken are already visible, both by OPEC +, the organization that aggregates OPEC and a group of non-aligned (10) led by Russia , especially the cut of 9.7 million barrels per day (mbpd) between May 1st and July 31st, and the initiatives of the G20, the group of the world’s 20 largest economies, where a wide range of economic measures was recently defined, from the outset, the debt relief of the most disadvantaged countries, moratorium on developing countries and capital injections in the most developed economies to counter pandemic effects.
For analysts of the International Energy Agency, as is clearly underlined in this document, the last months of 2020 should already show signs of stabilization, although this will depend on the evolution of the Covid-19 pandemic, especially because, in the middle of June the news arriving from the most diverse latitudes are far from totally appeasing.
This is because, on the one hand, the big economies have already started to ease the restrictive measures applied since February to contain the expansion of Covid-19, activating all the mechanisms of economic recovery after a “winter of terror”, especially in the USA , in China and Europe, the three most powerful global economic blocs, on the other hand, in these same geo-economic spaces, the news about the “death” of the pandemic is proving to be slightly exaggerated.
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