- NNPC Offers Its Oil at a Discount to Regain Market Share
Nigeria has cut the price of every type of crude it sells in an effort to regain the share of the global oil market at a time when there’s a “huge” glut of cargoes.
The Nigerian National Petroleum Corporation (NNPC) lowered by at least $1 a barrel its official selling prices (OSPs) for 20 out of 26 oil grades monitored by Bloomberg, according to pricing lists.
Qua Iboe, Nigeria’s largest export crude under normal circumstances, was reduced by the most since 2014.
The price reductions are due to a “huge cargo overhang” as the country attempts to regain market share, Mele Kyari, Group General Manager for the Oil Marketing Division at NNPC, said by phone.
Like every other producer country, Nigeria is grappling with prices that are less than half what they were in July 2014. What makes the African nation’s situation more acute is a militant campaign that resulted in export flows falling to the lowest in at least nine years earlier this year.
Shipments are gradually resuming, and lower prices are a sign Nigeria is seeking to become more competitive in an already oversupplied global market.
“It is a bearish signal for the light, sweet market,” Eshan Ul-Haq, principal consultant at KBC Process Technology Ltd., said in an e-mail, referencing the types of crude Nigeria mostly pumps. “In order to capture a higher share of the market, OSPs have to come down.”
Brent crude futures slumped as much as 2.1 per cent yesterday to $51.57 a barrel, the largest intraday decline since October 7. They were down 2 per cent at $51.64 at 2:17 p.m. on the ICE Futures Europe exchange in London.
NNPC cut the selling price of Qua Iboe for November to a 17 cent premium to the benchmark dated Brent, according to the price list, from $1.07. It reduced the price of Bonny Light to a 7 cent premium and Forcados to a 41 cent discount to dated Brent.
Five companies that market the nation’s crude have raised the issue of high official selling prices, Kyari said earlier this week. But he said yesterday that the pricing decisions were unrelated to those “complaints.”
The reductions take place as the Organisation of Petroleum Exporting Countries (OPEC) — of which Nigeria is a member — attempts to cut its combined output to 32.5 million to 33 million barrels a day in an effort to steady oil markets.
Nigeria has said it will be exempted from any production cuts, though final details of such an agreement have yet to be worked out.
Because an OPEC output cut would primarily affect medium and heavy crude grades, lower prices from Nigeria are likely to reduce the price differential between light and heavier oil, according to Ul-Haq.
Meanwhile, the World Bank yesterday raised its 2017 forecast for crude oil prices to $55 per barrel from $53 per barrel as members of OPEC prepare to limit production after a long period of unrestrained output.
The benchmark Brent crude price was down by 2.4 per cent to $51.38 per barrel yesterday.
But the World Bank estimated that energy prices, which include oil, natural gas and coal, were projected to jump almost 25 per cent overall next year, a larger increase than anticipated in July.
The revised forecast appeared in the World Bank’s latest Commodity Markets Outlook. According to the World Bank, oil prices are expected to average $43 per barrel in 2016, unchanged from the July report.
“We expect a solid rise in energy prices, led by oil, next year,” Senior Economist and lead author of the Commodity Markets Outlook John Baffes said.
“However, there is considerable uncertainty around the outlook as we await the details and the implementation of the OPEC agreement, which, if carried through, will undoubtedly impact oil markets.”
A modest recovery was projected for most commodities in 2017 as demand strengthens and supplies tighten. Metals and minerals prices are expected to rise 4.1 per cent next year, a 0.5 percentage point upward revision due to increasing supply tightness.
Zinc prices are forecast to rise more than 20 per cent following the closure of some large zinc mines and production cuts in earlier years.
Gold is projected to decline slightly next year to $1,219 per ounce as interest rates are likely to rise and safe haven buying ebbs.
Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd
The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.
The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.
The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.
The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.
Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.
The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.
Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins
Oil Prices Recover from 4 Percent Decline as Joe Biden Wins
Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.
This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.
Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.
On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.
“Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.
“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”
The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.
“There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.
“Either you’re crimping energy demand or consumption behavior.”
Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020
Revenue of OPEC Members to Drop to 18 Year Low in 2020
The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.
EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.
“If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.
The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.
It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.
It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.
“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”
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