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OPEC Ministers Say the Market Might Need More Oil Cuts

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  • OPEC Ministers Say the Market Might Need More Oil Cuts

OPEC and other major crude-producing nations may need to extend output cuts into the second half of the year to re-balance the market, oil ministers for Iran and fellow group member Qatar said.

Global oil supplies have decreased as the Organization of Petroleum Exporting Countries and producers outside the group comply with a six-month deal to curb output that took effect on Jan. 1, Qatar’s Energy Minister Mohammed Al Sada said Wednesday at a news briefing in Doha. “It’s too early to make a judgement,” he said, adding that markets may re-balance in the third quarter.

“We kept it open to reconsider the rollover, and rollover is an option if needed,” Al Sada told Bloomberg TV in Qatar’s capital.

In principle, OPEC will have to cut output in the second half, Iran’s Oil Minister Bijan Namdar Zanganeh said, according to the Fars news agency. The issue needs further study before the group can make a decision, Zanganeh said, after meeting in Tehran with his counterpart from Venezuela, also an OPEC member.

The organization agreed in November to impose quotas on its members for the first time in eight years, in an effort to stem a supply glut that had depressed crude prices. OPEC enlisted support from 11 other producers on Dec. 10 in an historic deal to remove as much as 1.8 million barrels of oil a day from the market. OPEC expects to decide whether to extend the cuts at its bi-annual meeting in Vienna in May.

Benchmark Brent crude fell as much as 61 cents in London on Wednesday and was trading at $54.86 a barrel at 1:06 p.m. local time, on course for a third daily decline after industry data showed U.S. stockpiles surged.

Most OPEC members are happy with a crude price of about $60 a barrel, Zanganeh said, according to the Tasnim news agency. OPEC’s compliance with the accord on output has been very good, and non-OPEC producers have begun cutting production and pledged to reach their targets quickly, the Oil Ministry’s Shana news service reported him as saying. Iran is the third-biggest producer in OPEC, behind Saudi Arabia and Iraq, while Qatar ranks 11th.

A committee in charge of monitoring compliance with the deal is due to release its first report on Feb. 17, disclosing January production levels for participating countries, Qatar’s Al Sada said. The five-member committee, led by Kuwait, will use as many as six sources of data to measure output, he said.

Last month, Saudi Arabia’s Energy and Industry Minister Khalid Al-Falih said an extension of the agreement probably wouldn’t be necessary, given high levels of compliance and expectations of strong demand. Nonetheless, “all players have indicated their willingness to extend, if necessary,” he said on Jan. 16 in Abu Dhabi.

The oil market would be re-balanced when global inventories, currently near record highs, approached their five-year average level, Al Sada said. The third quarter of this year would be a “good estimate” for when this is likely to happen, he said.

Investment in the oil industry has tumbled during the past three years, and a failure to reverse this trend could hurt future supply and cause a shortage three years from now, Al Sada said. Current oil demand is healthy and will increase by 1.1 million to 1.2 million barrels a day in 2017, he said.

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

Nigeria’s Crude Oil Production Falls for Second Consecutive Month, OPEC Reports

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Nigeria’s crude oil production declined for the second consecutive month in March, according to the latest report from the Organization of Petroleum Exporting Countries (OPEC).

Data obtained from OPEC’s Monthly Oil Market Report for April 2024 reveals that Nigeria’s crude oil production depreciated from 1.322 million barrels per day (mbpd) in February to 1.231 mbpd in March.

This decline underscores the challenges faced by Africa’s largest oil-producing nation in maintaining consistent output levels.

Despite efforts to stabilize production, Nigeria has struggled to curb the impact of oil theft and pipeline vandalism, which continue to plague the industry.

The theft and sabotage of oil infrastructure have resulted in significant disruptions, contributing to the decline in crude oil production observed in recent months.

The Nigerian National Petroleum Company Limited (NNPCL) recently disclosed alarming statistics regarding oil theft incidents in the country.

According to reports, the NNPCL recorded 155 oil theft incidents within a single week, these incidents included illegal pipeline connections, refinery operations, vessel infractions, and oil spills, among others.

The persistent menace of oil theft poses a considerable threat to Nigeria’s economy and its position as a key player in the global oil market.

The illicit activities not only lead to revenue losses for the government but also disrupt the operations of oil companies and undermine investor confidence in the sector.

In response to the escalating problem, the Nigerian government has intensified efforts to combat oil theft and vandalism.

However, addressing these challenges requires a multi-faceted approach, including enhanced security measures, regulatory reforms, and community engagement initiatives.

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Crude Oil

Oil Prices Edge Higher Amidst Fear of Middle East Conflict

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Crude Oil

Amidst growing apprehensions of a potential conflict in the Middle East, oil prices have inched higher as investors anticipate a strike from Iran.

The specter of a showdown between Iran or its proxies and Israel has sent tremors across the oil market as traders brace for possible supply disruptions in the region.

Brent crude oil climbed above the $90 price level following a 1.1% gain on Wednesday while West Texas Intermediate (WTI) hovered near $86.

The anticipation of a strike, believed to be imminent by the United States and its allies, has cast a shadow over market sentiment. Such an escalation would follow Iran’s recent threat to retaliate against Israel for an attack on a diplomatic compound in Syria.

The trajectory of oil prices this year has been heavily influenced by geopolitical tensions and supply dynamics. Geopolitical unrest, coupled with ongoing OPEC+ supply cuts, has propelled oil prices nearly 18% higher since the beginning of the year.

However, this upward momentum is tempered by concerns such as swelling US crude stockpiles, now at their highest since July, and the impact of a hot US inflation print on Federal Reserve rate-cut expectations.

Despite the bullish sentiment prevailing among many of the world’s top traders and Wall Street banks, with some envisioning a return to $100 for the global benchmark, caution lingers.

Macquarie Group has cautioned that Brent could enter a bear market in the second half of the year if geopolitical events fail to materialize into actual supply disruptions.

“The current geopolitical environment continues to provide support to oil prices,” remarked Warren Patterson, head of commodities strategy for ING Groep NV in Singapore. However, he added, “further upside is limited without a fresh catalyst or further escalation in the Middle East.”

The rhetoric from Iran’s Supreme Leader, Ayatollah Ali Khamenei, reaffirming a vow to retaliate against Israel, has only heightened tensions in the region.

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Commodities

Geopolitical Uncertainty Drives Gold Prices Higher Despite Fed Rate Cut Concerns

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As tensions simmer in the Middle East and concerns loom over Federal Reserve policy, gold continues its upward trajectory, defying expectations and reinforcing its status as the ultimate safe-haven asset.

The latest surge in gold prices comes amidst escalating geopolitical tensions in the Middle East.

Reports suggest that the United States and its allies are bracing for potential missile or drone strikes by Iran or its proxies on military and government targets in Israel. Such a significant escalation in the six-month-old conflict has sent shockwaves through financial markets, prompting investors to seek refuge in gold.

Despite initial setbacks earlier in the week, gold resumed its blistering rally, buoyed by the specter of geopolitical uncertainty.

On Wednesday, the precious metal witnessed its most significant decline in almost a month following a hotter-than-expected US inflation readout.

This unexpected data led traders to recalibrate their expectations for Federal Reserve interest rate cuts this year, causing the yield on 10-year Treasuries to surge above 4.5%.

However, gold’s resilience in the face of shifting market dynamics remains remarkable. Even as concerns mount over the Fed’s rate-cutting trajectory, the allure of gold as a safe-haven asset persists.

Prices hover just shy of a record high reached earlier in the week, propelled by robust buying from central banks.

Market analysts interviewed by Bloomberg anticipate further gains in gold prices, citing continued geopolitical tensions and strong momentum in the market.

The precious metal’s near-20% rally since mid-February underscores its enduring appeal as a hedge against uncertainty and inflationary pressures.

At 9:54 a.m. in Singapore, spot gold rose 0.3% to $2,341.58 an ounce, signaling continued investor confidence in the metal’s resilience.

The Bloomberg Dollar Spot Index, meanwhile, remained relatively unchanged near its highest level since November.

Silver, often considered a bellwether for precious metals, held steady after reaching a three-year high, while platinum and palladium also registered gains.

As the world navigates through a complex web of geopolitical tensions and economic uncertainties, gold remains a beacon of stability in an increasingly volatile landscape.

Its ability to weather market fluctuations and maintain its allure as a safe-haven asset reaffirms its timeless appeal to investors seeking refuge amidst uncertainty.

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