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Oil Erases 2016 Gains as Saudis Say Output Freeze Hinges on Iran

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Oil erased its gains for the year in New York as Saudi Arabia’s deputy crown prince said the kingdom will only freeze production if Iran and others follow suit.

Futures capped a weekly decline of 6.8 percent, the first since mid February. With producers scheduled to meet in Doha this month to complete an accord on capping output, Saudi Arabia’s Mohammed bin Salman signaled in an interview with Bloomberg that if any country raises output, the kingdom will also boost sales. While Iran will attend the talks, it has ruled out limiting supply as it restores exports after sanctions were lifted in January.

“The Saudis are now saying that they will only freeze if everyone else lines up behind the idea,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “That makes the meeting useless since the Iranians are going to continue increasing output.”

Oil rose 14 percent in March as it rebounded from a 12-year low amid speculation the global glut will ease as U.S. output falls. Russia will join Oman and every member of the Organization of Petroleum Exporting Countries apart from Libya in Doha on April 17 to discuss freezing production. OPEC members, led by Iran and Iraq, boosted output in March, a Bloomberg survey showed.

Tumbling Prices

West Texas Intermediate for May delivery fell $1.55, or 4 percent, to close at $36.79 a barrel on the New York Mercantile Exchange. It was the lowest settlement since March 15. Total volume traded was 10 percent below the 100-day average at 2:46 p.m. Prices rose 3.5 percent last quarter.

Brent for June settlement fell $1.66, or 4.1 percent, to $38.67 a barrel on the London-based ICE Futures Europe exchange. The May contract expired Thursday after gaining 34 cents to $39.60. The global benchmark crude closed at a 47-cent premium to WTI for June delivery.

“If all countries agree to freeze production, we’re ready,” Saudi Arabia’s bin Salman said. “If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door.”

Saudi Arabia hasn’t informed Russia that it has no plans to freeze oil output without Iran doing same, Energy Minister Alexander Novak told reporters in St. Petersburg on Friday. It’s too early to talk about any freeze solutions for Iran within a wider OPEC-Russia deal, he said.

“The Saudi comments about requiring all producers to take part in the freeze doom the Doha talks,” said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy. “The Doha process is falling apart before our eyes. The market has richly rewarded the rhetoric.”

OPEC Production

OPEC boosted output by 64,000 barrels to 33.09 million a day in March, data compiled by Bloomberg show. Iranian production rose by 100,000 barrels a day to 3.2 million last month, the most since May 2012, according to a Bloomberg survey of oil companies, producers and analysts. Sanctions against the nation, which were strengthened in July 2012, were lifted in January.

Commodities rebounded earlier this week as the dollar declined after Federal Reserve Chair Janet Yellen said heightened risks to the global economy warranted a cautious approach to further rate increases. A weaker U.S. currency boosts demand for raw materials priced in dollars.

Other news:

  • Rigs targeting crude in the U.S. fell by 10 to 362 this week, the least since November 2009, Baker Hughes Inc. said on its website Friday.
  • Colombia’s Ecopetrol SA can activate some fields if oil rises to $45 and above, Chief Executive Officer Juan Carlos Echeverry said in Bogota.
  • Nigeria will nominate Mohammed Barkindo, former group managing director of state-owned Nigerian National Petroleum Corp., for the position of OPEC secretary-general, according to two people familiar with the matter.
  • China, which is poised to overtake the U.S. as world’s biggest crude oil importer, will see its domestic production slip this year from a record, the National Energy Administration said on Friday.

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.

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Crude Oil

Brent Crude Oil Extends Gain to $86.66 a Barrel Amid Tight Supply

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Brent crude oil - Investors King

Tight global oil supply pushed Brent crude oil, against which Nigeria oil is priced, to a multi-year high of $86.66 per barrel on Monday at 3:30 pm Nigerian time.

Oil price was lifted by rising fuel demand in the United States and tight global supply as economies recover from pandemic-induced slumps.

The global energy supply crunch continues to show its teeth, as oil prices extend their upward march this week, a result of traders pricing in the ongoing rise in fuel demand – which amid limited supply response is depleting global stockpiles,” said Louise Dickson, senior oil markets analyst at Rystad Energy.

Goldman Sachs on the other hand is predicting a further increase in Brent crude oil to $90 a barrel, citing a strong rebound in global oil demand due to switching from gas to oil. This the bank estimated may contribute about 1 million barrels per day to global oil demand.

The investment bank said it expects oil demand to reach around 100 million barrels per day as consumption in Asia increases after the devastating effect of COVID-19.

While not our base-case, such persistence would pose upside risk to our $90/bbl year-end Brent price forecast,” Goldman said in a research note dated Oct. 24.

Earlier this month, the Organization of the Petroleum Exporting Countries, Russia and their allies, known as OPEC+ agreed to continue increasing oil supply by 400,000 bpd a month until April 2022 despite calls for an increase in global oil supplies.

The decision bolstered the price of Brent crude oil above $84 per barrel and expected to push the price even further to $90 a barrel. Low global oil supply amid rising demand for crude oil will continue to support oil prices in the near term.

Despite the recent power cuts and impacts to industrial activity in China, oil demand is likely instead supported by switching to diesel powered generators and diesel engines in LNG trucks, as well as by a ramp up in coal production,” Goldman Sachs stated.

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Energy

U.S. and Ghana Inaugurate New $64.7 Million Energy Infrastructure Investment at Pokuase

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electricity

U.S. Ambassador to Ghana Stephanie Sullivan joined the President of Ghana H.E. Nana Akufo-Addo and other Ghana government officials to formally inaugurate the Pokuase Bulk Supply Point (BSP) in Accra today.  The U.S. Millennium Challenge Corporation (MCC) funded the $64.7 million (GH₵ 391.9 million) electrical infrastructure project under the Ghana Power Compact.

“The Pokuase Bulk Supply Point represents sustainable infrastructure investment by the United States with Ghana that will benefit hundreds of thousands of Ghanaians now and into the future,” remarked Ambassador Sullivan at the inaugural event. “It will help deliver more reliable power to the people, places, and businesses of Accra that drive increased economic activity benefitting families, businesses, and communities.”

This represents a flagship investment under the Millennium Challenge Corporation’s Ghana Power Compact.  The Pokuase BSP will reduce outages in the power system, help stabilize voltages, and improve the quality and reliability of power supplied to the northern parts of the capital city of Accra.  It will also reduce technical losses in the power transmission and distribution system, contributing to the financial viability of the Electricity Company of Ghana (ECG) and the Ghana Grid Company (GRIDCo) in the long term.  The Pokuase BSP is now the largest-capacity BSP in Ghana at 580 megavolt amperes (MVA) and will directly benefit 350,000 utility customers.

The Government of Ghana implemented the project through the Millennium Development Authority (MiDA).  MiDA formally handed over the new power substation to ECG and GRIDCo in today’s ceremony.

The Pokuase BSP is the first major construction project to be completed under the Ghana Power Compact. The $316 million compact is helping the Government of Ghana improve the power sector through investments that will provide more reliable and affordable electricity to Ghana’s businesses and households. The compact is also funding a BSP at Kasoa and two primary substations at Kanda and Legon, in addition to other power sector investments, energy efficiency programs, and women’s empowerment programs within the power sector. The compact program will officially close on June 6, 2022.

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Crude Oil

Oil Falls Slightly as China Steps in to Curb Rising Coal Prices

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Crude oil - Investors King

Global oil prices moderated slightly on Wednesday following the Chinese government’s decision to curb high coal prices and ensure coal mines function at maximum capacity.

Brent crude, against which Nigerian oil is priced, dropped to $83.98 per barrel at 11:00 am Nigerian time. While the U.S. West Texas Intermediate (WTI) crude fell by 80 cents or 1 percent to $81.20 a barrel.

“China is planning to take steps to combat the steep rises in the domestic coal market … which could put considerable pressure on the coal price there and reverse the fuel switch to oil,” Commerzbank said.

Prices for Chinese coal and other commodities slumped in early trade, which in turn pulled oil down from an uptick earlier in the day.

China’s National Development and Reform Commission said on Tuesday it would bring coal prices back to a reasonable range and crack down on any irregularities that disturb market order or malicious speculation on thermal coal futures. read more

Oil markets in general remain supported on the back of a global coal and gas crunch, which has driven a switch to diesel and fuel oil for power generation.

But the market on Wednesday was also pressured by data from the American Petroleum Institute industry group which showed U.S. crude stocks rose by 3.3 million barrels for the week ended Oct. 15, according to market sources.

That was well above nine analysts’ forecasts for a rise of 1.9 million barrels in crude stocks, in a Reuters poll.

However, U.S. gasoline and distillate inventories, which include diesel, heating oil and jet fuel, fell much more than analysts had expected, pointing to strong demand.

Data from the U.S. Energy Information Administration is due later on Wednesday.

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