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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.

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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Crude Oil

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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Energy

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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