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Kachikwu: Nigeria Will Need Extra 900,000b/d to Recover Oil Lost to Militancy

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oil

The Minister of State for Petroleum, Dr. Ibe Kachikwu, has said that Nigeria will have to increase oil output by an average of 900,000 barrels per day (b/d) in order to recover crude oil that has been shut in to a series of militant attacks on oil and gas assets in the Niger Delta in recent months.

Kachikwu, who spoke to CNN’s Richard Quest last night, however said he was not particularly optimistic about the possible talks on a production freeze by other oil producing countries to bolster prices, saying similar efforts a few months ago had failed.

Despite his lack of confidence, the price of crude oil rose yesterday following reports that Russia and the Organisation of Petroleum Exporting Countries (OPEC) may resume dialogue on a production freeze.

The petroleum minister said the federal government was in continuing dialogue with militants and their representatives in the Niger Delta and expressed confidence that in the next one or two months, a resolution will be reached to end the attacks on oil assets.

“There’s a lot of dialogue, a lot of security meetings and we expect that in the next one or two months, we will arrive at a lasting resolution on the problem in the Niger Delta,” he said.

He added that Nigeria would need to produce on average 900,000b/d extra to recover oil and the attendant revenue lost to the militancy in recent months.

“We are producing some 1.5 million barrels per day and would need on average 900,000 barrels per day to catch up on what we have lost. If we can achieve peace, this will be feasible,” he said.

However, when he was reminded by Quest that an extra 900,000b/d would run contrary to possible talks next month on a production freeze in order to shore up oil prices, Kachikwu said he was not optimistic that a consensus could be reached on an output cap, as efforts in the past had failed.

“I’m not too optimistic about an output freeze, because we tried this in the past and it failed.

“Also, OPEC accounts for 30 per cent of total global output, so we will need to be aggressive in our engagements with producers that account for 70 per cent of output, so it is only if a consensus is reached, then me have some hope,” he explained.

On yesterday’s criticism by parents of the Chibok girls that the military and its resources were being diverted to secure oil facilities instead of recovering the schoolgirls who were kidnapped from their school by Boko Haram two years ago, he said it was not true that the girls were less important than oil facilities in the Niger Delta.

“It is not true that oil facilities are more of a priority than the Chibok girls. As you know President Muhammadu Buhari from the outset of his administration built a coalition with neighbouring countries to defeat the terrorism in the North-east.

“He also had to set up a panel to probe the diversion of funds meant for the procurement of arms to fight the insurgency. All these suggest that the insurgency in the North-east is a major priority of this government.

“I am a father and I can imagine what it means to have my children kept in captivity in a forest and the president feels the same way. So he has not given up the girls,” the minister said.

Meanwhile, the price of crude oil rose yesterday following reports that Russia and OPEC may resume dialogue on a production cap.

The Wall Street Journal (WSJ) reported that the global oil benchmark Brent crude rose 0.9 per cent to $47.38 a barrel on London’s Intercontinental Exchange (ICE) futures exchange. It however traded on the New York Mercantile Exchange, West Texas Intermediate futures at $44.86 a barrel, up 0.8 per cent.

Both the WSJ and UK’s Telegraph reported that the price movements were triggered by comments made by Saudi Arabia’s Energy Minister, Khalid al-Falih and Russian Energy Minister, Alexander Novak that market action was likely if discussions at an upcoming meeting in Algeria between OPEC and its other ally producers go well.

According to WSJ, prices have gained since Saudi’s al-Falih signalled last week that his country was open to measures to stabilise the market which has been struggling with oversupply for the past two years.

Saudi is the biggest producer among members of OPEC and historically seen as the de facto leader of the oil cartel. The OPEC meeting in Algeria is scheduled as an informal gathering in September.

The Telegraph also reported that the price movement was in reaction to the OPEC Algeria meeting where the focus is expected to return to a possible supply cap deal after similar talks in Doha failed earlier this year.

Novak confirmed Russia’s participation at the Algeria meeting to Saudi newspaper, Asharq al-Awsat. Novak stated that his country – the world’s third largest supplier of oil – was also involved in early discussions.

He said: “We are co-operating in the framework of consultations regarding the oil market with OPEC countries and producers from outside the organisation, and are determined to continue dialogue to achieve market stability.”

At the weekend, al-Falih told the Saudi Press Agency that “we are going to have a ministerial meeting of IEF in Algeria next month, and there is an opportunity for OPEC and major exporting non-OPEC ministers to meet and discuss the market situation, including any possible action that may be required to stabilise the market”.

He added: “We’ve said before that market rebalancing is already taking place but the process of clearing crude and product inventories will take time. We are on the right track and prices should reflect that.”

Oil price recovery from a 12-year low of $28 a barrel in January had floundered last month when global economic fears reignited concern that there was a glut in the market, causing prices to slump back to $41.66 a barrel.

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

OPEC Agrees to Increase Oil Supply by 500,000 Barrels Per Day Ahead of Surge in Demand

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Nigeria's economic Productivity

OPEC and allies finally agreed to ease their 7.7 million barrels per day production cut by 500,000 barrels per day starting from January 2021.

This will now bring the oil cartel’s total production cuts to 7.2 million barrels per day starting from next year.

Oil prices rose after the news as the market believed the approval of Pfizer COVID-19 in the United Kingdom will kick start a series of approvals and helped restore confidence, increase business activities and demand for the commodity across the globe.

After the outcome of the meeting was made public on Thursday, Brent Crude Oil against which Nigerian oil is priced gained 1.35 percent on Friday after gaining 1.4 percent on Thursday to $49.37 per barrel at 11.35 am Nigerian time on Friday.

The US West Texas Intermediate gained 1.29 percent to $46.23 barrel on Friday.

500,000 bpd from January is not the nightmare scenario that the market feared, but it is not what was really expected weeks ago,” said Rystad Energy senior oil markets analyst Paola Rodriguez Masiu. “Markets are now reacting positively and prices are recording a small increase as 500,000 of extra supply is not deadly for balances,” she added.

Investors King increased business sentiment in the energy sector to boost investment, increase activity in the sector and most important improve crude oil demand enough to accommodate the 500,000 barrels per day extra that would be hitting the global market starting from January.

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

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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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