Angola: Cabinda crude oil prices recover in July, but outlook remains clouded
On average, Angola’s Cabinda crude oil sold at USD 44.3 per barrel (pb) in July, up from June’s USD 41.1 pb, as demand and supply conditions continued to improve. The average price in July was up 7.7% month-on-month; however, prices remained depressed by historical standards as they were still down 31.7% year-on-year.
The uptick in prices over the month has been driven by a stronger-than-expected recovery in private sector activity and falling inventories, as supply continued to be tightened amid the OPEC+ production cut deal. Consequently, Angolan oil production fell to 1.14 million barrels per day (mbpd) in July, down from June’s 1.24 mbpd and marking the lowest level of output since April 2005. Crude oil production among all OPEC+ members, however, rose from 22.2 mbpd in June to 23.2 mbpd in July: Output skyrocketed in Saudi Arabia, while Kuwait, Iraq and the UAE also increased their production in July compared to June.
Prices continued to rise through mid-August on the back of improved demand and supply dynamics; however, the balance of risks is titled to the downside due to the easing of OPEC production cut measures in mid-July, a pick-up in U.S. shale production, the prospects of greater output in Libya and a potential intensification of lockdown measures amid rising new Covid-19 cases. Moreover, the strength of the post-pandemic economic recovery remains uncertain. Turning to output, Angolan crude production is forecast to decline this year compared to last year, as the previous output cuts weigh on production.