Majorwaves Energy Report April Edition

Editor’s Note

…the coming of black swans

Following the price war between Russia and Saudi Arabia, the negotiations across the globe championed by the U.S. and OPEC+ have been unparalleled but remain a mere scratch on the surface.

The world has lost 25-30 million b/d in demand due to COVID-19, and has already registered an estimated glut of 1.8 billion barrels of crude oil. There’s an urgent need to mop up the glut and make cuts that will surpass the loss in daily demand.

However, if analysis from Wood Mackenzie, is anything to go by, then China’s strategic and commercial petroleum reserves could reach 1.15 billion barrels sometime this year, equivalent to 83 days of oil demand, up from 900 million in 2019 and just 200 million barrels in 2014. That’s some succour.

Based on the World Health Organization Situation Reports (SITREPs) of 24 March, London School of Hygiene and Tropical Medicine (LSHTP) estimates that, almost all African countries are likely to reach 10,000 cases in May, after hitting the first thousand in the beginning of that month. It stated that, these numbers are largely synchronised continent-wide, but real burdens are certainly higher than reports.

It further added that countries like Egypt, Algeria, Nigeria and Senegal are expected to reach the first 10,000 cases of Covid-19 by mid-April, along with Morocco, South Africa and Tunisia. According to LSTHP’s model, around the end of April, the first 10,000 cases will be reached in a group of countries that includes Ethiopia, Kenya, Namibia and Equatorial Guinea.

Though the global death toll stands between 2-3 per cent, Africa has so far registered 4-5 per cent average from all confirmed cases across the continent. This tells the continent is on the cusp of an outbreak that will overwhelm existing isolation centres and facilities if not taken seriously.

As the continent battles the pandemic, its situation is worsened by the fall in oil price. The oil producing nations will either reach for their reserves or go borrowing to meet obligations in the interim. As they do that, transparency is key.

A joint IMF and World Bank paper recently highlighted that sub-Saharan countries should dedicate efforts to sustain their public debt by improving the quality of debt transparency and management.

The recent cases across Africa of hidden debts highlight low capacity in debt reporting, weak legal framework and monitoring of public debt in African countries. These are indications that the continent is highly vulnerable to the coming of some black swans.

Jerome Onoja