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

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Brent Oil
  • 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.

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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