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Oil Prices Slump 1% as OPEC’s Output Hits Eight-month High

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  • Oil Prices Slump 1% as OPEC’s Output Hits Eight-month High

Oil prices fell about one per cent wednesday after the Organisation of Petroleum Exporting Countries (OPEC) reported its September oil output at eight-year highs in its monthly Oil Market Report (OMR), thus eroding optimism over the carte’s pledge to bring a global crude oil glut under control.

This is coming as energy ministers from Qatar, the United Arab Emirates, Algeria, Venezuela and Russia yesterday began informal closed-door talks with the Secretary General of OPEC, Mr. Mohammed Barkindo, in Istanbul, Turkey, as part of the coordinated efforts to rebalance the oil market.

Also, concerns that the American Petroleum Institute (API) could report the first built in United States crude oil stocks in six weeks in preliminary inventory numbers have fueled possibility of worsening the glut in the market as Reuters reported that analysts expected the US government to report that crude oil stockpiles rose 300,000 barrels last week.

Global benchmark crude oil Brent crude fell 52 cents, or one per cent, to $51.89 a barrel while the US West Texas Intermediate (WTI) crude slipped 68 cents, or 1.3 per cent, to $50.11.

However, despite the drop, Brent is still up nearly 13 per cent since OPEC announced on September 27 that the group and other major crude oil producers would agree on a sizeable output cut or freeze to reduce a global glut by November 30 when OPEC meets in Vienna.

OPEC’s latest monthly report, issued yesterday, showed an increase in its oil production in September to the highest in at least eight years and a rise in the forecast for 2017 non-OPEC supply growth.

In its monthly market report, OPEC said expected total world oil demand for 2016 was revised upward from its previous report by 10,000 bpd to 1.24 million bpd.

Next year, world oil demand is expected to increase by 1.15 million bpd, a level unchanged from OPEC’s previous report.

The group produced 33.39 million barrels per day (bpd) last month, up 220,000 bpd from August, and as much as 890,000 bpd above the new supply target.

In a related development, energy ministers from Qatar, the United Arab Emirates, Algeria, Venezuela and Russia began informal closed-door talks with Barkindo in Istanbul as they try to coordinate efforts to rebalance the oil market.

OPEC officials are holding a flurry of meetings in coming weeks to nail down an agreement reached in Algiers last month on modest output cuts, the first such deal since 2008, for which they are seeking cooperation from non-OPEC producers.

The ministers were meeting on the sidelines of the World Energy Congress in Istanbul but no decision is expected from yesterday’s talks.

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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OPEC+ Production Cuts Set to Balance Global Oil Market, Says Russian Deputy PM

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In a statement on Monday, Russian Deputy Prime Minister Alexander Novak expressed confidence that the global oil market will achieve balance in the second half of 2024, thanks to the production cut strategies implemented by the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+.

OPEC+, which includes major oil-producing countries such as Saudi Arabia and Russia, has been actively managing oil output to stabilize the market since late 2022.

In their most recent meeting on June 2, the group agreed to extend their latest production cut of 2.2 million barrels per day (bpd) until the end of September. This cut is scheduled to be gradually phased out starting in October.

“The market will always be balanced thanks to our actions,” Novak stated, emphasizing the importance of the coordinated efforts by OPEC+ in maintaining market equilibrium.

The U.S. Energy Information Administration (EIA) recently projected that global oil demand will surpass supply by approximately 750,000 bpd in the latter half of 2024 due to the continued reduction in OPEC+ output.

This outlook was echoed in a report by OPEC last week, which highlighted an anticipated oil supply deficit in the coming months and into 2025.

Novak’s remarks come at a crucial time for the global oil market, which has experienced significant volatility over the past year.

The OPEC+ alliance has been pivotal in mitigating some of this instability by adjusting production levels in response to fluctuating demand and other market dynamics.

Analysts suggest that the measures taken by OPEC+ will play a vital role in ensuring that the oil market remains stable as the world continues to navigate economic uncertainties and fluctuating energy demands.

The production cuts are expected to support oil prices by limiting supply, thereby helping to balance the market.

The impact of these production cuts is already being felt, with oil prices showing signs of stabilization.

However, the market remains sensitive to geopolitical developments and economic trends, which could influence future supply and demand dynamics.

As OPEC+ prepares to unwind some of its production cuts in the coming months, industry observers will be closely monitoring the market’s response.

The gradual phasing out of the cuts is designed to prevent any sudden shocks to the market, allowing for a smoother transition and sustained balance.

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Oil Prices Steady Amid U.S. Political Uncertainty and Middle East Tensions

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Oil prices held firm on Monday as the political uncertainty in the United States and ongoing tensions in the Middle East persist.

Brent crude oil, against which Nigerian oil is priced,  fell slightly by 13 cents, or 0.2%, to $84.90 a barrel after a 37-cent drop on Friday.

Similarly, U.S. West Texas Intermediate crude stood at $82.15 a barrel, down 6 cents, or 0.1%.

The dollar’s strength, which followed a failed assassination attempt on U.S. presidential candidate Donald Trump, exerted some pressure on oil prices.

A stronger dollar typically makes oil more expensive for buyers using other currencies, leading to reduced demand.

“I don’t think you can ignore the uncertainty that the weekend’s assassination attempt will cast across a deeply divided country in the lead-up to the election,” said Tony Sycamore, market analyst at IG.

In the Middle East, efforts to end the Gaza conflict between Israel and Hamas stalled over the weekend.

Talks were halted after three days, although a Hamas official indicated that the group had not withdrawn from discussions.

The situation escalated further when an Israeli attack targeting a Hamas military leader killed 90 people on Saturday, maintaining the geopolitical premium on oil.

Despite these geopolitical tensions, oil markets remain supported by supply cuts from OPEC+. Iraq’s oil ministry has pledged to compensate for any overproduction since the beginning of the year, reinforcing the market’s stability.

Last week, Brent fell more than 1.7% after four weeks of gains, while WTI futures slid 1.1%. The decline was largely attributed to a fall in China’s crude imports, which countered robust summer consumption in the United States.

“While fundamentals are still supportive, there are growing demand concerns, largely emanating from China,” noted ING analysts led by Warren Patterson.

China’s crude oil imports fell 2.3% in the first half of this year to 11.05 million barrels a day, with disappointing fuel demand and reduced output by independent refiners due to weak profit margins.

Also, crude throughput at Chinese refineries dropped 3.7% in June from a year earlier to 14.19 million barrels per day, marking the lowest level this year, according to customs data.

China’s economy has slowed in the second quarter, weighed down by a protracted property downturn and job insecurity, keeping alive expectations that Beijing will need to implement more stimulus measures.

In the United States, the active oil rig count, an early indicator of future output, fell by one to 478 last week, marking the lowest level since December 2021, according to energy services firm Baker Hughes.

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Nigeria Awards $21M Contract to Meter 187 Crude Oil Flow Stations

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The Federal Executive Council (FEC) has approved a $21 million contract to meter 187 crude oil flow stations across Nigeria.

The decision was announced by the Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, during a press briefing in Abuja.

Minister Lokpobiri highlighted that this initiative is part of the government’s broader strategy to reorganize the oil and gas sector, ensuring accurate accounting of the country’s crude oil production and exports.

The contract, awarded to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), aims to install metering systems at flow stations within the Niger Delta region.

“This project marks a major development that has never happened in this country. The metering of our 187 flow stations will provide proper accountability of our oil production and exportation,” Lokpobiri stated. The project is expected to be completed within 180 days.

In addition to the metering contract, the FEC also approved the deployment of advanced software to monitor the movement of Nigeria’s crude oil from the point of loading to its final destination.

This technology will allow real-time tracking of crude oil shipments, addressing long-standing issues of oil theft and misreporting.

Lokpobiri explained, “With this advanced cargo tracking technology, we will know from the point of loading in Nigeria up to the final destination. This step is crucial in ensuring Nigerians get maximum value for the crude oil produced.”

The metering and monitoring initiatives come at a time when Nigeria faces significant challenges in its oil production.

Domestic refineries have complained of insufficient crude supplies, and there have been persistent concerns about the transparency of actual crude oil volumes produced in the Niger Delta.

Nigeria’s current production stands at less than 1.3 million barrels per day, below the 1.5 million barrels daily quota approved by the Organisation of Petroleum Exporting Countries (OPEC).

The initiatives are part of the government’s efforts to ramp up crude oil production and increase revenue.

“Oil remains the fastest way to raise the funding needed to address our economic and social problems,” Lokpobiri noted.

The accurate tracking and metering of oil production are expected to bolster investor confidence and contribute to the country’s economic stability.

The minister also hinted at ongoing efforts to rekindle investor confidence in Nigeria’s oil sector, which has seen a decline in major investments over the past 12 years.

“Since the inception of this administration, we have been working hard to bring back the confidence of the investing community,” Lokpobiri declared.

In a related development, the Port Harcourt refinery is expected to come on stream soon, although Lokpobiri did not specify a date for its operational commencement.

The refinery’s activation is anticipated to further boost Nigeria’s oil processing capacity and reduce dependence on imported refined petroleum products.

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