Weekly Economic And Financial Commentary – July 13, 2020

The U.S Energy Information Administration (EIA) released its July Short Term Energy Outlook (STEO) which showed the global crude oil market switched to a deficit of 1.9mbpd in June compared to a surplus of 5,1mbpd in May due to a combination of voluntary and involuntary cuts, amidst a rebound in demand. While demand jumped 6.2% MoM to 89.5mbpd, supply contracted by 1.9% MoM to 87.6mbpd in June. With the improving industrial activities and reopening of most economies, the EIA now expects global oil consumption to increase by 6.1mbpd over H2 2020 to 96mbpd compared to the level over H1 2020 of 89.8mbpd. As such, the global crude oil market is forecast to remain in a deficit for the rest of the year. However, given the high inventory build-up occasioned by the cumulative market surplus of 40.2mbpd over H1 2020, crude oil prices are forecast to be range bound at $41.5/barrel over H2 compared to average of $39.9/barrel and Q2 low of $29.3/barrel. Brent crude prices gained 1.03% last week to settle at $43.4/barrel with a month to date gain of 4.8%. The close price last week reduced the year to date decline to 36.2% and is 54.4% above the Federal Government of Nigeria 2020 revised budget benchmark of $28/barrel.