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Brent Falls to 12-Year Low Below $28 as Iran’s Oil to Swell Glut

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Brent Oil

Brent crude fell to a 12-year low in London, briefly dipping below $28 a barrel, after the lifting of international sanctions on Iran paved the way for increased supply amid a global glut.

Futures lost as much as 4.4 percent in London to the lowest since November 2003. Iran is beginning efforts to boost output and exports by 500,000 barrels a day now that restrictions have ended, Amir Hossein Zamaninia, deputy oil minister for commerce and international affairs, said Sunday. Saudi Oil Minister Ali al-Naimi dismissed supply concerns with a forecast that prices will recover.

“The likely increase of Iranian oil production could not have come at a more unfavorable point in time, with the oil market being oversupplied and renewed economic concerns,” Giovanni Staunovo, an analyst at UBS Group AG in Zurich, said in a report. “It is not worth holding a direct exposure to crude oil at present, before more clarity sets in.”

Brent capped a third annual loss in 2015 as the Organization of Petroleum Exporting Countries effectively abandoned output limits. Iran, which was OPEC’s second-biggest producer before sanctions were intensified in 2012, is trying to regain its lost market share and doesn’t intend to pressure prices, officials from its petroleum ministry and national oil company said this month.

Brent for March settlement fell as much as $1.27 to $27.67 a barrel on the London-based ICE Futures Europe exchange and was at $28.50 as of 9:29 a.m. London time. Front-month prices declined 14 percent last week for a third weekly drop. The European benchmark crude was at a discount of as much as $2 to West Texas Intermediate for March, the most since 2010.

WTI for February delivery fell as much as $1.06, or 3.6 percent, to $28.36 a barrel on the New York Mercantile Exchange. The contract slid $1.78 on Friday. Total volume traded Monday was more than double the 100-day average. Prices have lost 22 percent this year.

Buyers of Iranian crude are free to import as much of it as they want after the International Atomic Energy Agency determined that the country had curbed its ability to develop a nuclear weapon. As holder of the world’s fourth-largest reserves of crude and biggest deposits of natural gas, the nation gains immediate access to about $50 billion in frozen accounts overseas, funds the government says it will use to rebuild industries.

“Uncertainty remains regarding how much oil Iran can bring on in the short term as well as their re-entry strategy,” Victor Shum, a vice president for Asia Pacific at IHS Inc., said Sunday. “Export levels could feasibly ramp up quite quickly due to releasing this pent-up supply.”

The Persian Gulf nation will only be able to increase oil production by 100,000 barrels a day, or 3.7 percent, a month after sanctions are lifted and by 400,000 in six months, according to the median estimate of 12 analysts and economists surveyed by Bloomberg. Iran is OPEC’s fifth-biggest producer.

Saudi Outlook

Saudi Arabia’s al-Naimi said Sunday that crude prices will rise and market forces and cooperation among producing nations will lead in time to renewed stability.

He declined to comment on how the removal of economic sanctions against Iran might affect prices. Saudi Arabia is the world’s biggest crude exporter, pumping 10.25 million barrels a day in December, according to data compiled by Bloomberg.

Hedge funds last week increased bearish oil wagers to a record as global equities fell and sanctions on Iran were poised to end. Speculators’ short position in WTI rose 15 percent in the period ended Jan. 12, data from the U.S. Commodity Futures Trading Commission show. It’s the highest in records dating back to 2006. Net-long positions fell to the lowest in more than five years.

Bloomberg

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Markets

Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd

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Oil

The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.

The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.

The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.

The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.

Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.

The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.

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Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins

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Oil Prices Recover from 4 Percent Decline as Joe Biden Wins

Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.

This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.

Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.

On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.

Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”

The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.

There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.

“Either you’re crimping energy demand or consumption behavior.”

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Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020

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Revenue of OPEC Members to Drop to 18 Year Low in 2020

The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.

EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.

If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.

The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.

It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.

It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.

“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”

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