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Crude Oil Prices Drop Days After Output Cut

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  • Crude Oil Prices Drop Days After Output Cut

Brent crude oil price dropped by 1.87 per cent to $53.93 a barrel after hitting $54.19 a barrel following the decision by the Organisation of the Petroleum Exporting Countries (OPEC) to cut production output a week ago.

The price of Brent crude had risen by 4.5 per cent to $54.19 a barrel, its highest level this year.

The deal, OPEC’s first output cut for eight years, was designed to reverse a slump in global oil prices and was expected to see the group reduce production by 1.2 million barrels a day from January 2017.

But a few days after the output cut, crude oil prices crashed with West Texas Intermediate declining by 1.69 per cent to $50.93.
Meanwhile, the United States Energy Information Administration (EIA), is uncertain about the extent the cut in production output would affect crude oil prices.

Lamenting the decline in crude oil prices on Wednesday, at a Petrotech 2016 Panel: OPEC Secretary General, Muhammed Barkindo, said that the downward spiral has given oil prices increased visibility in recent years in major economic centres and in various industry fora.

Barkindo, who spoke on: Uncertain Oil Prices in India, said: “During both cycles, low prices achieved only one thing: they dramatically choked off investments. Research and development spending was reduced. And drastic cost-cutting strategies were put into place across the board. Young people also lost any interest they might have had in making a career in the oil sector. And, in the long term, global supplies were put at risk.

“This, of course, sounds strikingly similar to the conditions we have been seeing lately – with global investments falling, oil revenue decreasing and impacts on the global economy, including declining trade. In fact, global exploration and production spending fell by around 26 per cent in 2015, and a further 22 per cent drop is anticipated in 2016. Combined, this amounts to more than $300 billion, and this trend is expected to extend into its third year, which is unprecedented in the history of oil industry.

“This is a stark contrast and challenge when we all know that, apart from the development aspirations and healthy economic growth of many producing countries, our capital intensive industry always requires huge investments for the production of new barrels, not only to meet growing demand but also to accommodate for decline rates from existing fields. With the current state of the oil market, the industry will simply not be able to comply with the massive oil-related investment requirements that are estimated to be around $10 trillion in the period to 2040.”

As in the previous downward cycles of the 1980s and 1990s, Barkindo said that it has been necessary to find a way to expedite the long-delayed rebalancing of the market in order to restore stability.

This current cycle’s recovery process, according to him, has taken far too long, and the risk of delaying the adjustment any longer would be costlier and more complicated with a host of negative implications in the coming years.

The IEA said in its December oil report that the extent to which the announced plans will be carried out and actually reduce supply below levels that would have occurred in their absence remains uncertain.

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

Crude Oil Pulled Back Despite Joe Biden Stimulus

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Crude Oil Pulled Back Despite Joe Biden Stimulus

Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.

Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.

On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.

OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”

Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.

The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.

Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.

But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.

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Crude Oil

OPEC Says Uncertainties Remain High in 2021

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OPEC Says Uncertainties Remain High in 2021

The Organization of the Petroleum Exporting Countries (OPEC) on Thursday said global uncertainties remained high going forward in 2021 but kept its oil demand forecast unchanged.

In the cartel’s latest oil outlook for 2021, oil demand is expected to increase by 5.9 million barrels per day year on year to 95.9 million barrels per day. The prediction was unchanged from December’s assessment.

However, OPEC and allies, said: “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.

Crude oil rose to $57 per barrel this week after incoming US President Joe Biden announced it would inject $1.9 trillion stimulus into the world’s largest economy.

But the recent rally in the commodity and stimulus announcement is expected to boost US crude oil output and disrupt OPEC+ production cuts strategy for the year.

The 2021 supply outlook is now slightly more optimistic for U.S. shale with oil prices increasing, and output is expected to recover more in the second half of 2021,” OPEC said.

Still, OPEC, in its forecast “assumes a healthy recovery in economic activities including industrial production, an improving labour market and higher vehicle sales than in 2020.”

“Accordingly, oil demand is anticipated to rise steadily this year supported primarily by transportation and industrial fuels,” the group said.

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Crude Oil

Brent Crude Oil Rose to $56.25 Per Barrel

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Brent Crude Oil Rose to $56.25 Per Barrel

Oil price surged following the declaration of Joe Biden as the President-elect of the United States of America last week after Trump’s mob invaded Capitol to disrupt a joint Senate session.

Also, the large drop in US crude inventories helped support crude oil price to over 11 months despite the second wave of COVID-19 crushing the world from Asia to Europe to America.

Brent crude oil, against which Nigerian Crude oil is priced, rose to $56.25 per barrel on Friday before pulling back to $55.422 per barrel on Monday during the London trading session.

Experts attributed the pullback to the rising number of COVID-19 cases in Asia with about 11 million people already locked down in Hebei province in China.

Covid hot spots flaring again in Asia, with 11 million people (in) lockdowns in China Hebei province… along with a touch of FED policy uncertainty has triggered some profit taking out of the gates this morning,” Stephen Innes, chief global market strategist at Axi, said in a note on Monday.

China, the world’s largest importer of crude oil, has joined the United Kingdom and others declaring full or partial lockdown to curb the second wave of COVID-19.

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