Oil Market Review in Japan No. 10/2020

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Oil Market Review in Japan No. 10/2020

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The key WTI (West Texas Intermediate) crude oil futures contract on NYMEX (New York Mercantile Exchange) in the August 20- August 26 week moved within a range between $42.34 per barrel and $43.39/bbl.

On August 27, the September contract turned down for the first time in four trading days in response to high price until the previous trading days, although Hurricane “Laura” weakened the power and became tropical depression after landing in Louisiana State. Crude oil production facilities with the total production capacity of over 1.5 million barrels per day (bpd) and oil refineries with the total capacity of over 2 million bpd in the Gulf of Mexico stopped their operations temporary due to the negative impacts from the Hurricane. The October contract closed at $43.04/bbl down $0.35/bbl from the previous day.

On August 28, the key contract turned down slightly due to position adjustment at the weekend. The impacts from the Hurricane was more limited than expected. The Hurricane had little impact on crude oil price. Baker Hughes reported that the number of operating U.S. oil- drilling rigs decreased by three units from a week earlier to 180 units, decreasing for the first time in two weeks. The October contract finished $0.07/bbl lower at $42.97/bbl.

On August 31, the key contract turned down for the third straight trading day. The market performed well in the morning by the announcement of Abu Dhabi National Oil Company (ADNOC) that the company would reduce crude oil shipments to Asian countries by 30% in October 2020. However, selling was gradually dominant due to concerns over diminishing oil demand. The October contract lost $0.36bbl to $42.61/bbl.

On September 1, the key contract expanded for the first in four trading day by the expectation of increasing oil demand in response to improvements of the U.S. and China’s manufacturing condition index. The price was also supported by the expectation of decreasing weekly oil inventory in the U.S. to be announced on the following day and good performance in the U.S. stock market. The October contract gained $0.15/bbl to $42.76/bbl.

On September 2 the key contract turned down significantly. The U.S. Energy Information Administration (EIA) Weekly Report said that the U.S. crude oil inventory decreased by 9.7 million bbl in the last weekend compared to the previous weekend, which was more than the market expectation of the decrease by 3.7 million bbl and decreasing for the sixth straight week. However, the view that the decrease in crude oil inventory was only due to the impacts from the Hurricane and the announcement of the increase in crude oil production in August 2020 by the Organization of Petroleum Exporting Countries (OPEC) caused the significant price decrease. The October contract lost $1.25/bbl to $41.51/bbl.

The Asian benchmark crude oil of Dubai for October delivery on the Tokyo market ranged between $43.70/bbl and $44.90/bbl in the August 20- ugust 26 week. It closed at $44.70/bbl on August 27, at $44.60/bbl on August 28, at $44.60/bbl on August 31, at $45.10/bbl on September 1, at $45.30/bbl on September 2.

On the foreign exchange market in the August 20-August 26 week, the dollar moved within a range between 105.70 and 106.46 yen. It changed hands at 105.93 yen in late trading on August 27, at 106.66 yen on August 28, at 105.36 yen on August 31, at 105.89 yen on September 1, at 106.02 yen on September 2.

According to preliminary 10-day trade statistics released by the Ministry of finance on August 28, the average crude oil import CIF price for Japan in the early August period stood at 27,919 yen/kl (kiloliter), up 4,283 yen/kl from the previous 10-day period. In dollars, the price was $41.57/bbl, up $6.53/bbl.

The average exchange rate was 106.77 yen to the dollar. Japan’s average retail price on August 31 lost by 0.1 yen/l from a week earlier for gasoline, lost by 0.1 yen/l for diesel oil, and lost by 1 yen for kerosene on an 18-liter tank basis. The gasoline and diesel oil prices decreased for the third straight week. Kerosene price decreased for the first time in 16 th week. As crude oil cost increased for the fifth week of August. Motouri companies increased their wholesale prices by 1.5 yen/l for gasoline, diesel oil and kerosene for the next week.
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