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OPEC, Russia Deal to Frustrate Huge U.S. Shale Output

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  • OPEC, Russia Deal to Frustrate Huge U.S. Shale Output

Russia and Middle Eastern oil producers want to keep oil prices between $50 and $60 per barrel, RBC Capital Markets said at the weekend.

It added that supply from the United States (U.S.) remained real problem for the Organisation of Petroleum Exporting Countries (OPEC).

Drop in U.S. fuel inventories forced oil price to climb above $52 per barrel on Friday amid plans from OPEC and major non-OPEC producers for a supply freeze agreement to help stabilise prices.

Managing Director/Global Head of Commodity Strategy at RBC Capital Markets, Helima Croft, said: “I think that Saudi Arabia, OPEC and the Russians hope that some U.S. production will come back but $50 to $60 is probably not enough to resurrect the entire U.S. shale complex.

“I don’t think they are aiming for $70 to $80, because I don’t think they want to bring it all back.” Croft told CNBC at the weekend that Russia and the Middle East want a “steady grind higher, not a gallop” in terms of prices.

With oil prices above $70 per barrel production from shale will be economic and profitable but at $50 per barrel, oil production from shale would be uneconomic.

In their most recent note RBC capital markets see WTI and Brent averaging $51 per barrel and $53 per barrel over the rest of this year, before increasing to $56.50 per barrel and $59 per barrel on average next year.

November’s OPEC meeting is seen as the forum where a supply freeze deal will stand or fall. RBC’s Croft said it will be down to Saudi Arabia whether anything meaningful is achieved.

“Almost all these other countries are basically maxed out and really it will have to be the Saudi’s and the GCC (Gulf Cooperation Council) who takes the cut,” she said. “If the Saudi’s incentivise the deal, I think it gets done,” she added.

And on fears that Libya will ramp up supply to previous levels, Croft said political turmoil in the country would prevent that happening. “Libya has three governments at the moment; there are 100 militias in Tripoli. The country is awash with weapons. It’s like asking Somalia to get their act together,” she said.

OPEC’s output has increased with Iran’s crude oil production reaching 3.665 million barrels per day in September, OPEC said in a monthly report published on October 12.

OPEC crude oil production averaged 33.39 million barrels per day (mb/d) in September, increasing by 0.22 mb/d over the previous month, according to secondary sources.

Crude oil output increased mostly from Iraq, Nigeria and Libya, while production in Saudi Arabia showed the largest drop. Iran has repeatedly stated that it plans to increase oil output to 4 million barrels per day by March next year.

Iran has the fourth largest oil reserves and the largest natural gas reserves in the world, while the country is also the third largest exporter of oil in the world and has nearly doubled since sanctions were lifted on its oil exports in January 2016. In fact, Iran is recovering market share faster than many experts had expected.

China and India are looking to further lock down Iranian supply, with a large planned investment in Iran’s oil and gas infrastructure. Iran is seeking $130 billion worth of investment to bring its energy sector up to date after years of sanctions, Reuters reported.

 

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

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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