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Oil Retreat Weighs on Asian Energy Stocks as Dollar Loses Ground

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Oil extended its retreat from a seven-week high and Asian energy shares declined, while the dollar weakened versus major peers as traders weighed prospects for a U.S. interest-rate hike this year. European equity index futures advanced.

Crude sank below $47 a barrel in New York, dragged down by possible increases in supplies from Iraq and Nigeria, and the MSCI Asia Pacific Energy Index of shares fell for a fourth day. The Bloomberg Dollar Spot Index snapped its biggest two-day advance in a month as South Korea’s won led gains in emerging markets. New Zealand’s currency strengthened after its central bank said the pace of interest-rate cuts in the nation will be gradual. U.S. Treasury bond volatility was near a 20-month low.

Financial markets have been dominated over the past week by speculation about the timing of the Federal Reserve’s next increase in borrowing costs and an air of caution is evident before Chair Janet Yellen speaks Friday at an annual symposium in Jackson Hole, Wyoming. Regional Fed presidents including William Dudley and John Williams indicated last week that a rate hike could come as soon as next month, while futures prices indicate a 51 percent chance of such a move this year.

“With investors waiting for Yellen, it’s unlikely that we’ll see a strong direction in the stock market,” said Toshihiko Matsuno, a senior strategist with SMBC Friend Securities Co. in Tokyo. Still, “oil, which had been rebounding, has started to correct again,” dragging down commodity-related shares, he said.

Preliminary gauges of this month’s manufacturing activity in the euro area and the U.S. are scheduled for release on Tuesday, while central banks in Turkey and Hungary have policy meetings. A report is also forecast to show sales of new homes in America held near an eight-year high in July.

Commodities

West Texas Intermediate crude for October delivery slid 1 percent to $46.92 a barrel as of 7:05 a.m. London time. Militants in Nigeria have made a proposal to end hostilities, a development that could boost the nation’s oil output, and Iraq is in the process of boosting crude exports by about 5 percent.

WTI crude jumped 9.1 percent last week, buoyed by speculation that informal talks among major producers next month will bring about an output freeze.

“We’re seeing a bit of profit-taking,” said Ric Spooner, chief analyst at CMC Markets in Sydney. “There is still plenty of supply around. It wouldn’t be surprising to see this downtrend continue and it’s possible we could see some sort of basing around $44 to $45 a barrel.”

Gold held near a one-week low, while silver added 0.6 percent. Zinc advanced as much as 1.2 percent in London after Morgan Stanley said it was bullish and that demand from China’s steel industry would continue to support the price. The metal, which is used to galvanize steel, has surged more than 40 percent this year.

Stocks

A gauge of energy stocks on the MSCI Asia Pacific Index was down 0.9 percent, the biggest loss among 10 industry groups. Cnooc Ltd., China’s biggest offshore oil and gas producer, dropped by 1.2 percent.

Japan’s Topix index fell for the first time in three days, while Australia’s S&P/ASX 200 Index advanced to a two-week high. Hong Kong’s Hang Seng Index declined 0.3 percent and the Shanghai Composite Index gained 0.2 percent.

Trading volumes in Tokyo and Hong Kong were down more than 15 percent from their 30-day averages, according to data compiled by Bloomberg.

Futures on the Euro Stoxx 50 Index added 0.4 percent, while those on the S&P 500 Index were little changed. Contracts on the U.K.’s FTSE 100 Index gained 0.5 percent.

Currencies

The Dollar Spot Index lost 0.2 percent, after jumping 0.6 percent over the last two trading days. South Korea’s won strengthened 0.9 percent versus the greenback, rebounding from its weakest close of the month, and the Japanese yen rose 0.2 percent.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Crude Oil Dips Slightly on Friday Amid Demand Concerns

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On Friday, global crude oil prices experienced a slight dip, primarily attributed to mounting concerns surrounding demand despite signs of a tightening market.

Brent crude prices edged lower, nearing $83 per barrel, following a recent uptick of 1.6% over two consecutive sessions.

Similarly, West Texas Intermediate (WTI) crude hovered around $78 per barrel. Despite the dip, market indicators suggest a relatively robust market, with US crude inventories expanding less than anticipated in the previous week.

The oil market finds itself amidst a complex dynamic, balancing optimistic signals such as reduced OPEC+ output and heightened tensions in the Middle East against persistent worries about Chinese demand, particularly as the nation grapples with economic challenges.

This delicate equilibrium has led oil futures to mirror the oscillations of broader stock markets, underscoring the interconnectedness of global economic factors.

Analysts, including Michael Tran from RBC Capital Markets LLC, highlight the recurring theme of robust oil demand juxtaposed with concerning Chinese macroeconomic data, contributing to market volatility.

Also, recent attacks on commercial shipping in the Red Sea by Houthi militants have added a risk premium to oil futures, reflecting geopolitical uncertainties beyond immediate demand-supply dynamics.

While US crude inventories saw a slight rise, they remain below seasonal averages, indicating some resilience in the market despite prevailing uncertainties.

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Nigeria’s Petrol Imports Decrease by 1 Billion Litres Following Subsidy Removal

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Nigeria’s monthly petrol imports declined by approximately 1 billion litres following the fuel subsidy removal by President Bola Ahmed Tinubu, the National Bureau of Statistics (NBS) reported.

The NBS findings illuminate the tangible effects of this policy shift on the country’s petroleum importation dynamics.

Prior to the subsidy removal, the NBS report delineated a consistent pattern of petrol imports with quantities ranging between 1.91 billion and 2.29 billion litres from March to May 2023.

However, in the aftermath of Tinubu’s decision, the nation witnessed a notable downturn in petrol imports, with figures plummeting to 1.64 billion litres in June, the first post-subsidy month.

This downward trend persisted in subsequent months, with July recording a further reduction to 1.45 billion litres and August witnessing a significant decline to 1.09 billion litres.

August’s import figures represented a decrease of over 1 billion litres compared to the corresponding period in 2022.

The NBS report underscores the pivotal role of the subsidy removal in reshaping Nigeria’s petrol import landscape with the Nigerian National Petroleum Company emerging as the sole importer of fuel in the current scenario.

Despite higher petrol imports in the first half of 2023 compared to the previous year, the decline in June, July, and August underscores the profound impact of subsidy removal on import dynamics, affirming the NBS’s latest findings.

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Nigeria’s Oil Rig Count Soars From 11 to 30, Says NUPRC CEO

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The Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe, has announced a surge in the country’s oil rig count.

Komolafe disclosed that Nigeria’s oil rigs have escalated from 11 to 30, a substantial increase since 2011.

Attributing this surge to concerted efforts by NUPRC and other governmental stakeholders, Komolafe highlighted the importance of instilling confidence, certainty, and predictability in the oil and gas industry.

He explained the pivotal role of the recently implemented Petroleum Industry Act (PIA), which has spurred significant capital expenditure amounting to billions of dollars over the past two and a half years.

Speaking in Lagos after receiving The Sun Award, Komolafe underscored the effective discharge of NUPRC’s statutory mandate, which has contributed to the success stories witnessed in the sector.

The surge in Nigeria’s oil rig count signifies a tangible measure of vibrant activities within the upstream oil and gas sector, reflecting increased drilling activity and heightened industry dynamism.

Also, Komolafe noted that NUPRC has issued over 17 regulations aimed at enhancing certainty and predictability in industry operations, aligning with the objectives outlined in the PIA.

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