We talked in the wake of the OPEC deal over a week ago. Now we have a non-OPEC adherence to the deal. How much of a floor under the oil price which is about $50 dollars do you hope to create?
Certainly, the aspiration is to get as close to $60 a barrel as we can. It’s a tall order but I think all the numbers are trending towards that given the fact that we haven’t even started executing the cut itself. This is just the momentum building on the back of the agreement. Everyone is hoping that we can get closer to $60. You want to keep the price within the $60 range. If it gets too high it becomes a problem in its own right.
You gave me a great answer in Vienna about cheating. I very blatantly asked you, “what about the cheating?” People don’t trust the levels historically set by OPEC. You said to me this time it’s different. I wonder if you could just share that because I think one of the big concerns people have would be about adherence to this deal, but you think its different this time.
I think it’s different because in the past you tended to force countries towards a coalition or towards a resolution. This time there’s a major consensus. Everybody’s hurting. Everybody has realised that it needs to be done for most of OPEC and indeed for non-OPEC economies to survive. There hasn’t been too much of beating people into line, it’s been more of a consensual build up. Secondly, there’s a group that has been set up to monitor this. Both the Opec and Non-Opec countries understand that both sides will have to keep to the deal otherwise, it will falter. I think the urgency of now, and the criticality of the economies that they have to protect is enough of an incentive for everyone to be in line this time.
What worries you most about the part of this story that OPEC cannot control. Clearly some non-OPEC countries have signed up to the bill at this point but obviously, there are risks around how the shale producers may ramp up production in the light of a headline oil price increase. Is that the main worry and why the deal is so short or are there other things that concern you?
Certainly, the shale issue is a major one, because if shale begins to mop up production heavily and begins to cut into the share of traditional shares or percentages of most OPEC members you’re going to see some reaction. Secondly, if other non-OPEC countries don’t come on board as rapidly as some have and decide to take advantage of it while continuing to amass their production that could lead to a price fall. Everybody is on the edge. Watching to make sure both sides keep to the deal whether they be OPEC and non-OPEC. Within OPEC we’re also very determined to make sure that we keep to the deal. Saudi Arabia has shown a great sense of leadership and momentum trying to rally everybody back from the initial policy and into a court zone. But like all associations where everything is hinged on perfect delivery, if anyone slips out of the boat they are creating a problem. We’re hoping that at the end of the day people realise that there’s a need to stay on board.
Is it a source of regret for you and for your government that there wasn’t the will or the ability to do this 18 months ago; that the Saudis weren’t prepared to drive this deal back then?
In some sense yes. Nigeria certainly hurt without that oil money so we would have liked to see this come to fruition very early, and I’m sure we would not have gone into recession if we had this deal in play on time. But having said that the reality of the Saudi lesson is that is they didn’t put this on board, if they didn’t drive everyone to understand that OPEC cannot be the can carrying entity, the ability to bring non-OPEC members on board would have been limited. We might have had a short-term loss, but I think in the long term it will be better for everyone that we went through that cycle.
You just made some nice comments about the Saudis then, but do you think there was a real question mark on the relevance of OPEC and that the Saudis have done the right thing by shouldering the weight of these production cuts to get OPEC back into the game, to be seen as relevant to the oil market?
Within OPEC itself we always believed OPEC was relevant, and the fact that the whole world looked to us even though we’re only a 40 per cent producer in the oil market made us always believe we were relevant. Outside of OPEC there were some credibility issues. Would we survive? Would we ever come back together? Would we ever be able to use the cartel power in ways that we did before? And I think Saudi coming back and rallying everyone with some huge numbers helped bring back the credibility and certainly convinced the likes of Russia to come on board.
Can I ask you what happens in six months time because while you have an exception right now there might be pressure if there’s another deal in 6 months time if the market has not been rebalanced for those who had exceptions to be included in a new OPEC deal? How do you feel about that? Do you feel the pressure to get the market right in your own country and be a willing player to cut production in 6 months time?
I think this is just the start of our momentum, and the thing we did in Vienna wasn’t a one-off. We agreed to continue to consult to make this wider body a monitoring instrument. It means that in 6 months time when this should be due for another review, if we feel that the market has not balanced enough, more cuts may be coming. But again that’s going to depend on what has happened in shale production. If within that period we find that what all shale producers have done is simply inch into the market and continue to ramp up volumes then there may be some question marks there.
You flew to Delhi in between these meetings and you signed a memorandum of understanding with the Indians to give them a large percentage of Nigerian production going forward as well. How sensitive are key buyers of your product from China to India to the price of oil at say $58 to $63? You say $60 would be the ideal number for you, but I wonder what that does to lessen the ability of the market to balance itself if it was at $60 rather than at $40.
My experience in India was that the price sensitivity became very high once we began to cross the 60 number. Countries are going to continue to deepen their ability to look for alternatives and look for how to save costs by virtue of limiting their consumption. That’s going to be an on-going thing and OPEC is going to have to deal with in the long term. On the whole I think that everyone realises that for investments to continue in these countries and for oil to even get produced at all. Some sensible number is needed otherwise investments will dry up like they have over the last 18 months. So the deal with India, which we still haven’t signed. We’re just trying to dot our Is and cross our Ts. All we’ve done so far is sign a statement of intent. But, there is a good appetite for Nigerian oil in Asian countries. There is obviously consciousness on the part of Nigeria with the sensitivity of pricing and I think that once we begin to cross the $60 margin, you’re going to begin to see some of the old reactions again.
When is Nigeria going to realise a post-oil strategy which is going to benefit its population?
A lot of things have gone wrong, and a lot of things could have been done better. We’ve lost many years of income that could have been applied to many sectors, so there’s a race against time. We are trying to restructure the economy and move more to agriculture and services. The contribution of those sectors to our GDP is increasing by the day. But the more important thing is that oil got us here positively and negatively and oil is also going to get us out of it so the first discipline that we need to do is clean up our oil sector. We need to make sure that the right incentives are there, eliminate corruption, and begin to grow refineries. Thirty per cent of our foreign exchange burden is on the importation of refined petroleum products and for a country that has produced billions and billions of barrels of oil to not have functional refineries is regrettable, but that’s something that we’re very focusing on right now.
At $60 a barrel, what growth rates do you expect Nigeria to see in 2017?
Well as you know Nigeria has been in recession for the last 6-8 months. If we can round out 2017 with a growth rate of 4-5% I think we will be delighted
Increased Demand Paves The Way for Expansion of Africa’s Sugar Industry
Africa, June 2021: A new focus report produced by the Oxford Business Group (OBG), in partnership with the International Sugar Organization (ISO), explores the potential that Africa’s sugar industry holds for growth on the back of an anticipated rise in regional demand. The report was presented to ISO members during the MECAS meeting at the Organization’s 58th Council Session, on June 17th 2021.
Titled “Sugar in Africa”, the report highlights the opportunities for investors to contribute to the industry’s development by helping to bridge infrastructure gaps in segments such as farming and refining and port facilities.
The report considers the benefits that the African Continental Free Trade Area (AfCFTA) could deliver by supporting fair intra-African sugar trade efforts and bringing regulatory frameworks under a common umbrella, which will be key to improving competitiveness.
The increased international focus on ESG standards is another topical issue examined. Here, the report charts the initiatives already under way in Africa supported by green-focused investment with sustainability at their core, which will help to instil confidence in new investors keen to adhere to ESG principles in their decision-making.
In addition, subscribers will find coverage of the impact that Covid-19 had on the industry, with detailed analysis provided of the decrease in both worldwide sugar production and prices, as movement restrictions and social-distancing measures took their toll on operations.
The report shines a spotlight on sugar production in key markets across the continent, noting regional differences in terms of output and assessing individual countries’ roles as net exporters and importers.
It also includes an interview with José Orive, Executive Director, International Sugar Organisation, in which he maps out the particularities of the African sugar industry, while sharing his thoughts on what needs to be done to promote continental trade and sustainable development.
“The region is well advanced in terms of sugar production overall, but several challenges still hinder its full potential,” he said. “It is not enough to just produce sugar; producers must be able to move it to buyers efficiently. When all negotiations related to the AfCFTA have concluded, we expect greater investment across the continent and a clearer regulatory framework.”
Karine Loehman, OBG’s Managing Director for Africa, said that while the challenges faced by Africa’s sugar producers shouldn’t be underestimated, the new report produced with the ISO pointed to an industry primed for growth on the back of anticipated increased consumption across the continent and higher levels of output in sub-Saharan Africa.
“Regional demand for sugar is expected to rise in the coming years, driven up by Africa’s population growth and drawing a line under declines triggered by the Covid-19 pandemic,” she said. “With sub-Saharan Africa’s per capita sugar consumption currently standing at around half of the global average, the opportunities to help meet increasing domestic need by boosting production are considerable.”
The study on Africa’s sugar industry forms part of a series of tailored reports that OBG is currently producing with its partners, alongside other highly relevant, go-to research tools, including a range of country-specific Growth and Recovery Outlook articles and interviews.
Global Demand for Investment Gold Plunged by 70% YoY to 161 Metric Tons in Q1 2021
Last year, investors flocked to gold as stock markets crashed on a gloomy economic outlook due to the spread of the COVID-19 pandemic. In the second quarter of 2020, global demand for investment gold surged to over 591 metric tons, the second-highest level since 2016. However, the investors’ demand for gold has dropped significantly this year.
According to data compiled by AksjeBloggen, global demand for investment gold plunged by 70% year-over-year to 161 metric tons in the first quarter of 2021.
The Lowest Quarterly Figures after Record Gold Investments in 2020
In 2016, the global gold demand amounted to 4,309 metric tons, revealed Statista and the World Gold Council data. By the end of 2019, this figure rose to 4,356 metric tons. Investment gold accounted for 30% of that amount. Worldwide gold jewelry demand volumes reached 2,118 metric tons that year. Central banks and technology followed with 648 and 326 metric tons, respectively.
Statistics show the global demand for investment gold surged amid the COVID-19 outbreak, growing by 35% YoY to almost 1,800 metric tons in 2020. Demands for gold used in technology also rose by 17% to 383.4 metric tons, while central banks and other institutions bought 326.2 metric tons of gold in 2020, a 50% plunge in a year.
However, after record gold investments in 2020, the global demand for gold for investment purposes dropped to the lowest quarterly level in years.
The Price of Gold Dropped by 5% Since January
The average gold value tends to increase during a recession, making it an attractive investment in uncertain times. In February 2019, a troy ounce of gold cost $1,320.07, revealed the Statista and World Gold Council data. By the end of that year, the price of gold rose to $1,479.13.
The gold price continued growing throughout 2020, reaching an all-time high of over $2,000 in August. By the end of the year, the precious metal price slipped to $1,864 and then rose to over $1,950 in January 2021.
However, the first quarter of the year brought a negative trend, with the price of gold falling to $1,684 by the end of March. Statistics indicate the price of gold stood at around $1,860 last week, a 5% drop since the beginning of the year.
Gold, Other Safe Haven Assets Plunge Ahead of Fed Rate Hikes
Gold and other safe-haven assets plunged last week as the Federal Reserve signals the possibility of raising interest rates twice in 2023 given the ongoing economic recovery post-COVID-19.
The price of gold dropped by 6.04 percent last week as investors rushed to move their funds out of safe-haven assets including the new gold, cryptocurrency.
The entire crypto space sheds $898 billion in market value to hover around $1.625 trillion last week, down from $2.523 trillion recorded on Wednesday 12, 2021. Its highest market capitalisation till date.
The Federal Reserve raised inflation expectations to 3.4 percent and shifted the year it is expected to increase interest rates from near-zero to 2023 from the previously projected 2024.
The new hawkish stance of the central bank led to capital outflow from safe havens and subsequently boosted dollar attraction.
The United States Dollar gained across the board with the dollar index that tracks its performance against six major currencies, rising by 0.63 percent to 91.103 last week.
However, on Monday morning the gold showed signs of recovery, gaining 0.5 percent to $1,772.34 per ounce following the retreat in U.S. treasury yield that boosted the attraction of non-yielding metal.
Bitcoin, the most dominant cryptocurrency coin, pared losses to $33,245 per coin, up from the $32,658 decline it posted last week.
Business4 weeks ago
End Of The Road For Internet Explorer As Microsoft Pulls The Plug
Cryptocurrency4 weeks ago
Can cryptocurrency survive regulators? Here’s what Ripple CEO says about XRP’s future
Ethereum4 weeks ago
Ethereum Closes In on Long-Sought Fix to Cut Energy Use Over 99%
Cryptocurrency4 weeks ago
BankDhofar Launches Mobile Banking Payments from Oman to India with RippleNet
Cryptocurrency4 weeks ago
US SEC To Work With Congress To Regulate Crypto Exchanges
Cryptocurrency2 weeks ago
Wei Zhou, Binance’s Chief Financial Officer Resigns
Education3 weeks ago
Senate Passes Bill To End HND/BSc Discrimination
Sport Business5 days ago
Cristiano Ronaldo Snubs Coca-Cola Drink in Euro 2020 Press Conference, Wipes $4B Off Market Value