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OPEC Records 82% Compliance on Output Cuts

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  • OPEC Records 82% Compliance on Output Cuts

The Organisation of the Petroleum Exporting Countries (OPEC)’s oil output is set to fall by more than 1 million barrels per day (bpd) in January, a Reuters survey found Tuesday, thus pointing to a strong start by the cartel in implementing its first supply cut deal in eight years.

OPEC had agreed to cut its output by about 1.2 million bpd from January 1 to prop up oil prices and reduce a supply glut.

Supply from the 11 OPEC members with production targets under the deal has averaged 30.01 million bpd, according to the survey based on shipping data and information from industry sources, down from 31.17 million bpd in December.

Compared with the levels that the countries agreed to make the reductions from – in most cases their October output – OPEC members have cut production by 958,000 bpd of the pledged 1.164 million bpd, equating to 82 per cent compliance.

Compliance of 80 per cent comfortably exceeds the initial 60 per cent achieved when the previous cuts deal was implemented in 2009, and the survey adds to indications that adherence so far has been high.

“This is very high, a good number,” an OPEC source said of the January compliance estimate. “I hope it continues.”

Oil edged above $55 a barrel yesterday as the cuts agreed by OPEC, Russia and other independent producers have helped to lift prices from a 12-year low near $27 a year ago.

The January drop in OPEC output has been offset slightly by higher supply from Libya and Nigeria, which are both exempt from the OPEC agreement because of output losses caused by conflict.

Saudi Arabia has reduced output to less than 10 million bpd in January, industry sources told Reuters, implementing a bigger cut than it had agreed to set a good example on compliance.

Iran, which was allowed to raise output under the OPEC deal because sanctions had crimped past supply, pumped an additional 20,000 bpd.

OPEC announced a production target of 32.5 million bpd at its November 30 meeting, which was based on low figures for Libya and Nigeria and included Indonesia, which has since left the group.

Combined output in January from all members is about 520,000 bpd above the target, adjusted to remove Indonesia, the survey showed.

The Reuters survey is based on shipping data provided by external sources, Thomson Reuters flows data and information provided by sources at oil companies, OPEC and consulting firms.

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

The Drop in US Crude Oil Inventories Boosted Oil Prices on Wednesday

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The Drop in US Crude Oil Inventories Boosted Oil Prices on Wednesday

Crude oil prices rose on Wednesday following a decline in US crude inventories last week.

The American Petroleum Institute (API) had reported that United States crude oil inventories declined by 5.3 million barrels in the week ended January 22, 2021, more than a reduction of 430,000 barrels predicted by a Reuters poll.

The unexpected decline, coupled with slowing new COVID-19 cases in China, the world’s largest importer of crude oil, boosted oil prices on Wednesday.

Brent crude, against which Nigerian crude oil is measured, rose by 41 cents or 0.7 percent to $56.32 per barrel.

The U.S. West Texas Intermediate (WTI) crude oil also gained 56 cents or 1 percent to $53.17 a barrel.

WTI is slightly firmer on the back of a larger-than-expected draw in US crude inventories reported by the API, which is offset by builds in gasoline and distillates,” said Vandana Hari, oil market analyst at Vanda Insights.

The data, however, showed petrol inventories grew by 3.1 million barrels in the week, more than experts projected.

Similarly, API data revealed that distillate fuel inventories that include diesel and heating oil, jumped by 1.4 million barrels, far higher than the 361,000 barrels decline predicted. However, refinery runs declined by 76,000 barrels per day.

Market participants are now in ‘wait and see’ mode, wanting to see how lockdowns evolve in the coming weeks and months, and how successful countries are in rolling out Covid-19 vaccines,” ING economics said in a note.

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Crude Oil

COVID-19 Plunges Nigeria’s Oil Revenue by 41% in the First Nine Months of 2020

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COVID-19 Plunges Nigeria’s Oil Revenue by 41% in the First Nine Months of 2020

Nigeria’s oil revenue declined by 41.44 percent in the first nine months of 2020 to $2.033 billion, according to the latest data from the Nigerian National Petroleum Corporation, NNPC.

This represents a decline of 41.44 percent from $3.47 billion filed in the same period of 2019 when there was no COVID-19.

In the September 2020 edition of NNPC’s Monthly Financial and Operations Report (MFOR), revenue from oil and gas rose by 16 percent to $120.49 million in the month of September, a 66 percent or $234.81 million drop from $355.3 million posted in the same month of 2019.

The global lockdowns caused by the COVID-19 pandemic plunged Nigeria’s crude oil sales and global demand for the commodity. This was further compounded by Nigeria’s high cost of production compared to Saudi Arabia, Russia and others that were offering discounts to boost sales during one of the most challenging periods in human history.

Experts like Prof. Yinka Omorogbe, President of Nigeria Association of Energy Economics, NAEE, were not surprised with the drop in earnings given the effect of COVID-19 on the world’s economy.

She, however, called for the revamp of the nation’s petroleum sector laws and diversification of the economy away from oil revenue dependence. She said “Covid-19 made 2020 a very hot year and it battered the oil industry internationally and we are not an exception; so we could not have been unaffected”.

She also said the effect of the fall “is definitely a wake-up call; we have to diversify, strengthen our other resources and capabilities”.

Omorogbe, a former NNPC Board Secretary, urged the government and the operators in the sector to look inward and think strategically, stating: “think medium term, think of where they want to be and the government, above all, must think of how best we can utilize our resources, so that we can achieve our objectives once we know and define them.

“It is a clear wake-up call, if not we will just sit here and find that we have become one of the poorest nations in the world”, she noted.

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Commodities

Crude Oil, Other Commodities Closing Price for Monday

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Crude Oil, Other Commodities Closing Price for Monday

Brent crude oil, Nigeria’s crude oil benchmark, gained 47 cents to $55.88 per barrel on Monday, while the US crude oil expanded by 50 cents to $52.77 per barrel.

Gold for February delivery fell $1 to $1,855.20 an ounce. Silver for March delivery fell 7 cents to $25.48 an ounce and March copper was little changed at $3.63 a pound.

The dollar fell to 103.80 Japanese yen from 103.83 yen. The euro fell to $1.2139 from $1.2167.

Wholesale gasoline for February delivery rose 1 cent to $1.56 a gallon. February heating oil rose 2 cents to $1.59 a gallon. February natural gas rose 16 cents to $2.60 per 1,000 cubic feet.

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