Angola: Cabinda prices rise to multi-year high in July
The average price for Cabinda oil rose to USD 75.8 per barrel (pb) in July, up from June’s USD 73.7 pb. July’s print marked a 2.8% increase over the prior month and the highest price level since October 2018. Moreover, the average price was up 71.7% over the same month a year prior (June: 79.2% year-on-year).
Although boosted by a low base effect, the strong uptick in prices also reflected the impact of the global economic reopening that has buoyed demand for the black gold, as well as easing output: Angolan production dropped to 1.05 million barrels per day (mbpd) in July from 1.07 mbpd in June. Turning to other OPEC+ members, output in Saudi Arabia jumped markedly, while production in Iraq, Kuwait and the UAE also rose.
Looking ahead, prices for crude oil have generally trended downward in August so far, weighed on by concerns over the spread of the Delta variant of Covid-19.The easing of OPEC+ production cuts should put further downward pressure on prices going forward. Meanwhile, Angolan output is forecast to ease slightly this year compared to last year due to the effects of previous production cuts, as well as the fallout from the oil price slump in 2020.
Commenting on the outlook, analysts at the EIU added:
“Oil prices have risen, but global oil majors operating in Angola cut capital expenditure and activity following the oil price slump in 2020, which will continue to affect production in 2021. […] We expect a return to growth from 2022, but the pace of expansion will remain relatively weak, averaging 2.7% a year in 2022–25. Weak oil sector activity will remain a major constraint, as production is forecast to continue to contract until 2024 at the earliest [and] the overall weak business environment will hamper the pace of new investment in non-oil sectors, which in turn will slow progress on economic diversification.”
Analysts at Banco de Fomento Angola are also rather pessimistic on the outlook, commenting:
“Stronger concerns are beginning to emerge about the effects of the Delta variant in Asian countries, including China, which could fight the pandemic with tighter restrictions again. At the same time, the IPCC’s new climate change report is also hurting appetite for the commodity.”