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Experts See Bright Economic Outlook, Predict Growth in 2017

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  • Experts See Bright Economic Outlook, Predict Growth in 2017

Analysts at both Standard Chartered Bank and Moody’s have predicted a bright economic outlook for 2017 as they predicted that the nation’s economy would rebound from its current recession and record growth in 2017, despite the challenges posed by weaker oil earnings and foreign exchange.

The two experts, Managing Director and Chief Economist, Global Research, Africa, Standard Chartered Bank, Razia Khan, and senior analytical adviser at Moody’s, Aurelien Mali, noted so in an advisory note and in an interview with Reuters respectively. While Khan predicted a 2.8 percent growth, Mali predicted 2.5 per cent expansion provided the country can achieve 2.2 million barrels per day production.

Nigeria, Africa’s largest economy faces its worst economic crisis in 25 years, which was caused by low oil prices that have eroded both government reserves and spending, and shortage of the greenback in the system.

According to Managing Director and Chief Economist, Global Research, Africa, Standard Chartered Bank, Razia Khan, “Growth in the non-oil sector, which accounts for c.92 per cent of GDP, was finally positive (but only just, with ‘growth’ of 0.03 per cent y/y), following two consecutive y/y contractions in Q1 and Q2. While the flat non-oil GDP data marks some improvement versus previous quarters, there is little to suggest that it has meaningfully improved economic momentum. With no evidence of improved FX liquidity, and the FX shortage still one of the key constraints on activity in Nigeria, we now expect negative growth to persist in Q4-2016. Consequently, we lower our 2016 GDP forecast to -1.7 per cent y/y (0.4 per cent prior).

“We raise our real GDP growth forecast for 2017, but only on a weaker base. Important reforms, not least those centered on Nigeria’s FX market, are required to unlock faster and more sustained economic growth, in our view. Despite the challenge posed by weaker oil earnings, Nigeria’s record on economic reform to date has disappointed”, she stated.

Khan also noted further that oil sector was in deeper contraction. According to her, “The big driver of the contraction in Q3 GDP was the decline in oil-sector growth, which the Nigerian Bureau of Statistics estimated average oil production at only 1.63mn barrels per day (mb/d), far below the 2.2mb/d assumed in the 2016 budget. This poor performance came despite the resumption in August of amnesty payments to Niger Delta militants, and more optimistic official oil output projections.

“Although early Q4 will likely have seen some improvement in oil production, we see little reason for optimism regarding the outlook. Talks between the presidency and community leaders in the Niger Delta in early November failed to produce a conclusive outcome. These discussions were followed shortly by the resumption of attacks on oil installations (claimed by a separate militant group, the Niger Delta Avengers), reducing oil production by c.300,000 barrels per day (b/d).

“Countering this are reports that locally owned companies, which contribute sizeably to onshore production in the Delta, are becoming more adept at dealing with pipeline attacks. There is talk of more transportation of oil via barges, allowing exports to continue even as pipelines are repaired, albeit at a higher cost and only in small amounts. However, to date, there has been little evidence of this being sufficient to lift production data.

On his part, Mali explained that “With resumption of oil production and the dollars that should come, we expect that Nigeria would be able to accelerate the implementation of the budget,” Mali said.

“With acceleration, we expect that (growth) could reach 2.5 percent next year,” he said.

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.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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