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Russians and Saudis Pledge Joint Effort to Limit Oil Production

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  • Russians and Saudis Pledge Joint Effort to Limit Oil Production

Saudi Arabia and Russia, the world’s two largest crude oil producers, said they’re ready to cooperate to limit output, helping send prices to a one-year high in London.

Russia is willing to join OPEC’s efforts to stabilize the market, which would require either a freeze or a cut, President Vladimir Putin said on Monday at the World Energy Congress in Istanbul. Many producers outside the group have expressed a willingness to cooperate on output caps, said Saudi Arabia’s Energy and Industry Minister Khalid Al-Falih, who added that he was “optimistic” there’ll be a deal that could lift prices as high as $60 by year-end.

Coordinated output curbs by Russia and the Organization of Petroleum Exporting Countries, who together pump about half the world’s oil, could boost fuel prices for consumers and revive the fortunes of a battered energy industry. While Putin’s comments are the firmest indication yet that such an agreement is possible, Russia is still pumping at record levels and has stopped short of a commitment to pull back. OPEC members also have many hurdles to overcome before implementing their first cuts in eight years.

“It’s a little bit early to start celebrating an agreement,” Tord Lien, Norway’s Petroleum and Energy Minister, said in an interview with Bloomberg TV on Monday. “They have made great progress, and this could end up in an agreement that will materialize around Christmas and the first quarter of next year.”

Surprise Deal

Ministers from some of the largest oil-producing nations are gathering in Turkey this week to discuss ways to end a two-year supply glut. With benchmark Brent crude trading at about $53 a barrel — less than half its price in mid-2014 — countries including Saudi Arabia remain under severe economic pressure, prompting last month’s surprise reversal of its policy of pumping without constraints.

OPEC agreed in principle on Sept. 28 in Algiers to limit output to a range of 32.5 million to 33 million barrels a day, compared with production last month of about 33.75 million. While the deal has helped lift crude prices by about 15 percent, precise details of who would make the cuts or whether producers outside the group would join weren’t finalized.

An OPEC committee will work on the details of how to share the burden of cuts and present its proposals at a formal Nov. 30 meeting in Vienna. Ministers from some group members, including Saudi Arabia and Algeria, will meet with non-OPEC nations including Russia and Azerbaijan in Istanbul on Wednesday to discuss wider cooperation.

Russian Cooperation

“Russia is ready to join in joint measures to limit output and calls on other oil exporters to do the same,” Putin said. “In the current situation, we think that a freeze or even a cut in oil production is probably the only proper decision to preserve stability in the global energy market.”

So far this month, Russia has pumped crude and and a light oil called condensate at a rate of 11.2 million barrels a day, according to preliminary data from the Energy Ministry’s CDU-TEK unit. If that continued for the whole month, it would set a post-Soviet record, beating September’s 11.1 million barrels a day. Russia would prefer to freeze its output at current levels rather than make reductions, Energy Minister Alexander Novak said earlier Monday in Istanbul.

For the Algiers production deal to work, Saudi Arabia would need to make some cuts. The kingdom pumped 10.58 million barrels of crude a day in September, just shy of its July record of 10.66 million, according to data compiled by Bloomberg.

Brent prices reached a one-year high of $53.73 a barrel in London Monday. Both Saudi Arabia’s Al-Falih and Bob Dudley, the chief executive officer of BP Plc, said that oil prices of about $60 a barrel by year-end are possible.

While traders have clearly welcomed the comments from Saudi Arabia and Russia, “caution may be the best practice,” Naeem Aslam, chief market analyst at ThinkMarkets U.K. Ltd., said by e-mail. “If history tells us anything, it is that these major oil players also have the habit to not respect the agreed agreement.”

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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Economic Strain Halts Nigeria’s Cocoa Industry: From 15 Factories to 5

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Once a bustling sector, Nigeria’s cocoa processing industry has hit a distressing low with operational factories dwindling from 15 to just five.

The cocoa industry, once a vibrant part of Nigeria’s economy, is now struggling to maintain even a fraction of its previous capacity.

The five remaining factories, operating at a combined utilization of merely 20,000 metric tons annually, now run at only 8% of their installed capacity.

This stark reduction from a robust 250,000 metric tons reflects the sector’s profound troubles.

Felix Oladunjoye, chairman of the Cocoa Processors Association of Nigeria (COPAN), voiced his concerns in a recent briefing, calling for an emergency declaration in the sector.

“The challenges are monumental. We need at least five times the working capital we had last year just to secure essential inputs,” Oladunjoye said.

Rising costs, especially in energy, alongside a cumbersome regulatory environment, have compounded the sector’s woes.

Farmers, who previously sold their cocoa beans to processors, now prefer to sell to merchants who offer higher prices.

This shift has further strained the remaining processors, who struggle to compete and maintain operations under the harsh economic conditions.

Also, multiple layers of taxation and high energy costs have rendered processing increasingly unviable.

Adding to the industry’s plight are new export regulations proposed by the National Agency for Food and Drug Administration and Control (NAFDAC).

Oladunjoye criticized these regulations as duplicative and detrimental, predicting they would lead to higher costs and penalties for exporters.

“These regulations will only worsen our situation, leading to more shutdowns and job losses,” he warned.

The cocoa processing sector is not only suffering from internal economic challenges but also from a tough external environment.

Nigerian processors are finding it difficult to compete with their counterparts in Ghana and Ivory Coast, who benefit from lower production costs and more favorable export conditions.

Despite Nigeria’s potential as a top cocoa producer, with a global ranking of the fourth-largest supplier in the 2021/2022 season, the industry is struggling to capitalize on its opportunities.

The decline in processing capacity and the industry’s current state of distress highlight the urgent need for policy interventions and financial support.

The government’s export drive initiatives, aimed at boosting the sector, seem to be falling short. With the industry facing over N500 billion in tied-up investments and debts, the call for a focused rescue plan has never been more urgent.

The cocoa sector remains a significant part of Nigeria’s economy, but without substantial support and reforms, it risks falling further into disrepair.

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Energy

Nigeria’s Power Sector to Get $7.5bn from $30bn African Electrification Initiative, Says Minister Adelabu

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Minister of Power Adebayo Adelabu has said that Nigeria is set to receive a portion of a $30 billion investment aimed at electrifying Africa.

During a visit to Splendor Electric Nigeria Limited, Adelabu revealed that the World Bank and the African Development Bank (AfDB) have committed to this ambitious initiative with Nigeria slated to receive approximately $7.5 billion, or 25% of the total fund.

The groundbreaking initiative is designed to extend electrification to an additional 300 million Africans over the next five years.

This large-scale project aims to address the energy deficit that has long plagued the continent and is expected to transform the power infrastructure significantly.

Adelabu expressed optimism about Nigeria’s role in the project, citing the country’s large population and ongoing power sector reforms as key factors in securing a substantial share of the funds.

“I want to inform you of the proposal or the intention, which is at an advanced stage, by the World Bank and the African Development Bank to spend about $30 billion to extend electrification to an additional 300 million Africans within the next five years. Nigeria is going to participate fully in this. I am confident that nothing less than 20% or 25% of this fund would come into Nigeria because of our population,” Adelabu stated.

The minister’s visit to Splendor Electric Nigeria Limited, a porcelain insulator company, underscores the government’s commitment to involving local businesses in the electrification drive.

The investment will focus on enhancing and upgrading power infrastructure, which is crucial for improving electricity access and reliability across Nigeria.

Despite the promising news, Nigeria continues to face significant challenges in its power sector. The country’s power grid has suffered frequent collapses, with the Nigerian Bureau of Statistics reporting less than 13 million electricity customers and frequent nationwide blackouts.

The International Energy Agency highlighted that Nigeria’s national grid experienced 46 collapses from 2017 to 2023, exacerbating the nation’s energy crisis.

To combat these issues, the government is also advancing the Presidential Power Initiative, a project in collaboration with Siemens, which aims to build thousands of new lines and numerous transmission and injection substations.

Adelabu noted that the pilot phase of this initiative is nearing completion and that Phase 1 will commence soon.

With over 200 million people and a chronic energy shortfall, Nigeria’s power sector is in urgent need of overhaul.

The additional $7.5 billion from the African Electrification Initiative represents a critical step toward achieving reliable and widespread electricity access.

The investment is expected to stimulate not only infrastructure development but also economic growth, creating opportunities for local companies and improving the quality of life for millions of Nigerians.

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Crude Oil

Oil Prices Climb as Markets Eye Potential US Rate Cuts in September

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Oil prices rose during the Asian trading session today on speculation that the U.S. Federal Reserve may begin cutting interest rates as soon as September.

Brent crude oil, against which Nigerian oil is priced, increased by 32 cents to $82.95 a barrel, while U.S. West Texas Intermediate crude oil climbed 34 cents to $80.47.

The anticipation of rate cuts stems from recent U.S. inflation and labor market data indicating a trend towards disinflation and balanced employment, according to ANZ Research.

The Federal Reserve is set to review its policy on July 30-31, with expectations of holding rates steady but providing clues for potential cuts in September.

The potential rate cuts could stimulate economic activity, increasing demand for oil. This optimism has been partially offset by recent concerns over China’s slower-than-expected economic growth, which could dampen global oil demand.

President Joe Biden’s announcement to not seek re-election and endorse Vice President Kamala Harris had minimal impact on oil markets.

Analysts suggest that U.S. presidential influence on oil production is limited, although a potential Trump presidency could boost oil demand due to his stance against electric vehicles.

In response to economic challenges, China surprised markets by lowering key policy and lending rates. While these measures aim to bolster the economy, analysts remain cautious about their immediate impact on oil demand.

With OPEC+ production cuts continuing to support prices, the focus remains on the U.S. Federal Reserve’s next moves.

Any decision to cut rates could further influence oil prices in the coming months, highlighting the interconnectedness of global economic policies and energy markets.

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