OPEC, allies considering cutting oil output by a further 500,000bpd

OPEC and its allies are considering cutting their oil output by a further 500,000 barrels per day (bpd) due to the impact on demand from the coronavirus, three OPEC sources and an industry source familiar with the discussions said. It’s good news that Angola’s Isabel dos Santos has decided to sell her investments in Portuguese companies, Portugal’s Economy Minister Pedro Siza Vieira told Reuters, saying that would avoid any potential damage to them as she battles fraud

charges.     

Meanwhile  China’s Unipec, a top buyer, has halted purchases of West African crude oil despite a sharp drop in shipping rates as the coronavirus outbreak cuts demand. Instead of seeking them for domestic use, Unipec sought to sell off at least five cargoes of West African oil, mostly from Angola.  It was offering two cargoes of Gindungo at dated Brent flat, a Pazflor at plus $1.10, a Sangos at plus 50 cents and a Saturno at minus 65 cents. Also Asia’s largest refiner, China’s Sinopec Corp, instructed its plants to cut throughput this month by around 600,000 barrels per day as the rapidly spreading coronavirus hits fuel demand, sources told Reuters. The cuts are the steepest in over a decade and come as independent refiners also reduce runs by 30-50 per cent. 

Contagion fears have hit the Chinese aviation sector in particular with jet fuel cracks hitting their lowest levels in a decade on Monday at $8.64 per barrel over Dubai crude before inching up in later trading. One trader said the world’s top crude importer was increasingly “working from home” as more major airlines halted flight links and demand for refined products nose-dived Freight rates for VLCC tankers eastward plunged to among their lowest levels since September. 

Despite those discounts, Europe is set to be the most likely market for West African heavier oils, though jet fuel margins in Western markets also plumbed multi-year lows. So far, European refiners have held off on purchases and still believe offers will fall further “Distillate margins are still low, but as the prices should drop, (we) probably can compensate, as freight rates are coming off,” one potential buyer said.