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Nigeria Loses N88bn As India, US Reduce Oil Imports

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Crude oil gains

India and the United States have slashed their imports of Nigerian crude oil by 43 per cent and 53 per cent, respectively, translating to a loss of at least N88bn in earnings, the latest report from the Nigerian National Petroleum Corporation has shown.

India, which became the single largest buyer of Nigerian crude in 2013 after the US, reduced its imports from Nigeria in May this year as it bought 7.74 million barrels, down from 13.51 million barrels in April; 12.51 million barrels in March and 12.70 million barrels in February.

The Asian country had in January imported 16.29 million barrels of Nigerian crude, its highest monthly level this year, the NNPC data showed.

The US, whose imports of Nigerian crude rose by 577.8 per cent in the first quarter of this year compared to the same period of 2015, reduced its import by 5.77 million barrels in May from 10.13 million barrels in the previous month.

In February, the US bought as much as 12.12 million barrels from Nigeria, making it the second largest buyer of the country’s crude after India.

Using a conservative price of $40 per barrel and N197/$ official exchange rate in May, the decrease of 11.14 million barrels in the two countries’ imports of Nigerian crude amounts to N87.9bn.

Global benchmark, Brent crude, had on May 26 hit $50 for the first time in 2016.

The Editorial Director, European and African Oil, Platts, Joel Hanley, in an interview with our correspondent on the sidelines of the Platts’ Lagos Oil Forum, said India “can go anywhere else to buy if the price is right.”

He, however, said, “Nigeria has priced itself to a level where it has regular buyers in India; obviously, there is investment from India that helps that flow. I will say that it is a buyer’s market. India, China and every other buyer have their pick of the grades these days, and that is why differentials are so low. They can pick and choose whatever they want.

“I think right now in this kind of environment, it is about securing a good relationship and a good, reliable trade flow. Trust is so important. And I think if India and Nigeria can focus on that relationship, there shouldn’t be too much threat to that.

“However, if someone comes in at a cheaper price, then I don’t know how long the Indians will stick around because, they, like everyone else, have money to make.”

Three of Nigerian oil grades, Forcados, Qua Iboe and Brass River – have in the past three months been under force majeure – a legal clause that allows companies to cancel or delay deliveries due to unforeseen circumstances.

A number of India-owned refiners have been actively picking up Malaysian oil cargoes for loading in July and August amid growing uncertainty over the exports of Nigeria’s crude grades, according to regional sweet crude traders.

Following the spate of production disruptions largely caused by the recent surge in militant attacks on oil infrastructure in the Niger Delta that cut the nation’s output to the lowest in almost three decades, exports of the commodity from the country have continued to take a serious beating.

Nigeria relies heavily on earning from oil exports, and the recent production disruptions came as an additional headache for an economy that already suffers from the sharp drop in oil prices since 2014.

Weak demand for Nigerian crude oil has caused the number of ships without cargoes to rise to levels not seen in recent times.

As a result, the cost of sending crude oil cargoes from West Africa to Northwest Europe on Suezmaxes has dropped to the lowest level in over 14 years, Platts data has shown.

The continued force majeure on the three grades has substantially reduced the demand for Suezmaxes in the region in recent months, and caused WAF tonnage list to swell to levels rarely seen by veteran market participants.

Suezmaxes are medium to large-sized ships with a deadweight tonnage between 120,000 and 200,000. They are the largest marine vessels that meet the restrictions of the Suez Canal, and are capable of transiting the canal in a laden condition.

According to one shipbroker’s position list, there were 32 ships available prior to the start of the current fixing window, versus a three-month average of 14.8 ships. There were also 29 ships free of cargo, which could make WAF fixing window.

The number of ships means that each cargo that is shown to multiple owners attracts multiple offers and allows charterers to drive freight rates downwards.

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

Oil Holds Near Highest Since 2018 With Global Markets Tightening

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Crude Oil - Investors King

Oil held steady near the highest close since 2018, with the global energy crunch set to increase demand for crude as stockpiles fall from the U.S. to China.

Futures in London headed for a third weekly gain. Global onshore crude stocks sank by almost 21 million barrels last week, led by China, according to data analytics firm Kayrros, while U.S. inventories are near a three-year low. The surge in natural gas prices is expected to force some consumers to switch to oil, tightening the market further ahead of the northern hemisphere winter.

China on Friday sold oil to Hengli Petrochemical Co. and a unit of PetroChina Co. in the first auction of crude from its strategic reserves said traders with the knowledge of the matter. Grades sold included Oman, Upper Zakum and Forties.

Oil has rallied recently after a period of Covid-induced demand uncertainty, with some of the world’s largest traders and banks predicting prices may climb further amid the energy crisis. Global crude consumption could rise by an additional 370,000 barrels a day if natural gas costs stay high, according to the Organization of Petroleum Exporting Countries.

“Underpinning the latest bout of price strength is a tightening supply backdrop,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd.

Various underlying oil market gauges are also pointing to a strengthening market. The key spread between Brent futures for December and a year later is near $7, the strongest since 2019. That’s a sign traders are positive about the market outlook.

At the same time, the premium options traders are paying for bearish put options is the smallest since January 2020, another indication that traders are less concerned about a pullback in prices.

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Energy

Unlocking Investments into Africa’s Renewable Energy Market

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green energy - Investors King

The African Energy Guarantee Facility (AEGF) is launching a virtual roadshow of free webinars allowing a deeper understanding of risk issues for renewable energy projects on the continent, and conversations around risk mitigation solutions. The first webinar will take place on Thursday, 23 September from 14:30-16:00 hrs. EAT. 

The session will be oriented on how to get more energy projects from the drawing board to the grid. While the energy demand in African economies is expected to nearly double by 2040, and although the potential for renewable energy is 1,000 times larger than the demand, only 2GW out of almost 180GW of this new renewable power were added on the African continent.

Clearly not good enough! To improve the situation within the next two decades, new solutions need to be implemented urgently. De-risking and promoting private sector investments will play a crucial part of it.

In this 90-min interactive session, AEGF partners: the European Investment Bank (EIB), KfW Development Bank, Munich Re and the African Trade Insurance Agency (ATI) will share their experience and provide valuable insights on how they were able to come together and design practical solutions for investors and financiers of green energy projects in Africa aligned with SDG7 objectives.

Across Africa, the complexity of renewable energy projects and their long tenors hold back crucial energy investment. Tailored to the specific needs and risk profiles of sustain­able energy projects, AEGF will tackle the investment challenge by providing underwriting expertise and capacity tailored to market needs.

The AEGF will significantly boost private investment in sustainable energy projects, both expanding access to clean energy and contribute to achieving UN Sustainable Development Goals. The scheme supports new private sector investment in eligible renewable energy, energy efficiency and energy access projects in sub-Saharan Africa.

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Energy

Shell Signs Agreement To Sell Permian Interest For $9.5B to ConocoPhillips

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Shell profit drops 44 percent

Shell Enterprises LLC, a subsidiary of Royal Dutch Shell plc, has reached an agreement for the sale of its Permian business to ConocoPhillips, a leading shales developer in the basin, for $9.5 billion in cash. The transaction will transfer all of Shell’s interest in the Permian to ConocoPhillips, subject to regulatory approvals.

“After reviewing multiple strategies and portfolio options for our Permian assets, this transaction with ConocoPhillips emerged as a very compelling value proposition,” said Wael Sawan, Upstream Director. “This decision once again reflects our focus on value over volumes as well as disciplined stewardship of capital. This transaction, made possible by the Permian team’s outstanding operational performance, provides excellent value to our shareholders through accelerating cash delivery and additional distributions.”

Shell’s Upstream business plays a critical role in the Powering Progress strategy through a more focused, competitive and resilient portfolio that provides the energy the world needs today whilst funding shareholder distributions as well as the energy transition.

The cash proceeds from this transaction will be used to fund $7 billion in additional shareholder distributions after closing, with the remainder used for further strengthening of the balance sheet. These distributions will be in addition to our shareholder distributions in the range of 20-30 percent of cash flow from operations. The effective date of the transaction is July 1, 2021 with closing expected in Q4 2021.

Shell has been providing energy to U.S. customers for more than 100 years and plans to remain an energy leader in the country for decades to come.

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