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OPEC Detects ‘High Compliance’ With Oil Cut Deal

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OPEC
  • OPEC Detects ‘High Compliance’ With Oil Cut Deal

OPEC said Tuesday oil producers have kept their promise to cut output in accordance with a landmark deal designed to lift petroleum prices.

As a result, prices rose in February as last year’s accord between OPEC members and some non-members gained traction, the Organisation of the Petroleum Exporting Countries said in its monthly oil report.

The oil price recovery was, however, under threat from fresh supply as high-cost producers in the United States started drilling again, encouraged by the price upswing, as well as from rising Canadian production.

An OPEC oil price reference basket rose by about two percent to an average of $53.37 in February, the organisation said.

“High compliance with supply adjustments by OPEC and some non-OPEC producers supported gains,” it said.

In December, OPEC agreed with 11 non-members, including Russia, to cut output in the first half of this year to push prices higher.

– Placing bets –
Looking at the oil futures market, a key gauge of pent-up demand, OPEC said a record number of investors were placing wagers on price increases.

“Bets on crude oil prices rising have hit a new record high for the third month in a row, giving additional support to oil prices,” OPEC said.

“Investor optimism over the effectiveness of the production adjustments encouraged record bets on a sustained rally,” it said, adding however that “growing US output and stubbornly high stockpiles kept price gains in check and contained prices within a tight range”.

The oil price has seen a strong recovery from 2016 lows and is currently more than 30 percent up from levels a year ago.

But the rally has been stuttering in recent weeks as a cocktail of threats to the recovery has emerged.

Investors are nervous because of a surprisingly big jump in US stockpiles reported last week, increased US shale production and concerns about the implementation of the OPEC-led deal to cut output.

On Tuesday, WTI oil stood at $48.59 per barrel and Brent at $51.77. Both contracts were up on the day, but between four and five percent lower than three months ago.

– Demand also rises –
OPEC does not predict oil prices, but the organisation did revise up its supply outlook for this year in an acknowledgement that fresh drilling in the US was having an impact on efforts to reduce a glut in the market.

“An improving outlook for Canadian oil sands and US supply were the main contributors to the revision,” it said.

In February, “growing US output and stubbornly high stockpiles kept price gains in check and contained prices within a tight range”, it noted.

Citing a survey by Baker Hughes, an oil firm, OPEC said the number of American oil rigs had risen for seven consecutive weeks and was now 55 percent higher than a year ago.

Oil investors have been wondering whether OPEC might extend its current output deal to counter rising production elsewhere, but the report did not address that question.

Meanwhile, rising global demand for oil will help rebalance the market, OPEC projections showed.

The cartel boosted its 2017 outlook for demand growth to 1.26 million barrels per day, an increase of 70,000 barrels a day from last month’s outlook.

“The upward adjustments were due to more optimistic expectations for oil demand in OECD Europe, as well as Asia Pacific,” OPEC said.

OPEC’s 13 member countries together produce one-third of the world’s oil.

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 Decline for Third Consecutive Day on Weaker Economic Data and Inventory Concerns

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Crude Oil

Oil prices extended their decline for the third consecutive day on Wednesday as concerns over weaker economic data and increasing commercial inventories in the United States weighed on oil outlook.

Brent oil, against which Nigerian oil is priced, dropped by 51 cents to $89.51 per barrel, while U.S. West Texas Intermediate crude oil fell by 41 cents to $84.95 a barrel.

The softening of oil prices this week reflects the impact of economic headwinds on global demand, dampening the gains typically seen from geopolitical tensions.

Market observers are closely monitoring how Israel might respond to Iran’s recent attack, though analysts suggest that this event may not significantly affect Iran’s oil exports.

John Evans, an oil broker at PVM, remarked on the situation, noting that oil prices are readjusting after factoring in a “war premium” and facing setbacks in hopes for interest rate cuts.

The anticipation for interest rate cuts received a blow as top U.S. Federal Reserve officials, including Chair Jerome Powell, refrained from providing guidance on the timing of such cuts. This dashed investors’ expectations for significant reductions in borrowing costs this year.

Similarly, Britain’s slower-than-expected inflation rate in March hinted at a delay in the Bank of England’s rate cut, while inflation across the euro zone suggested a potential rate cut by the European Central Bank in June.

Meanwhile, concerns about U.S. crude inventories persist, with a Reuters poll indicating a rise of about 1.4 million barrels last week. Official data from the Energy Information Administration is awaited, scheduled for release on Wednesday.

Adding to the mix, Tengizchevroil announced plans for maintenance at one of six production trains at the Tengiz oilfield in Kazakhstan in May, further influencing market sentiment.

As the oil market navigates through a landscape of economic indicators and geopolitical events, investors remain vigilant for cues that could dictate future price movements.

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Commodities

Dangote Refinery Cuts Diesel Price to ₦1,000 Amid Economic Boost

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Aliko Dangote - Investors King

Dangote Petroleum Refinery has reduced the price of diesel from ₦1200 to ₦1,000 per litre.

This price adjustment is in response to the demand of oil marketers, who last week clamoured for a lower price.

Just three weeks ago, the refinery had already made waves by lowering the price of diesel to ₦1,200 per litre, a 30% reduction from the previous market price of around ₦1,600 per litre.

Now, with the latest reduction to ₦1,000 per litre, Dangote Refinery is demonstrating its commitment to providing accessible and affordable fuel to consumers across the country.

This move is expected to have far-reaching implications for Nigeria’s economy, particularly in tackling high inflation rates and promoting economic stability.

Aliko Dangote, Africa’s richest man and the owner of the refinery, expressed confidence that the reduction in diesel prices would contribute to a drop in inflation, offering hope for improved economic conditions.

Dangote stated that the Nigerian people have demonstrated patience amidst economic challenges, and he believes that this reduction in diesel prices is a step in the right direction.

He pointed out the aggressive devaluation of the naira, which has significantly impacted the country’s economy, and sees the price reduction as a positive development that will benefit Nigerians.

With this latest move, Dangote Refinery is not only reshaping the fuel market but also reaffirming its commitment to driving positive change and progress in Nigeria.

The reduction in diesel prices is expected to provide relief to consumers, businesses, and various sectors of the economy, paving the way for a brighter and more prosperous future.

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Crude Oil

IEA Cuts 2024 Oil Demand Growth Forecast by 100,000 Barrels per Day

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Crude Oil

The International Energy Agency (IEA) has reduced its forecast for global oil demand growth in 2024 by 100,000 barrels per day (bpd).

The agency cited a sluggish start to the year in developed economies as a key factor contributing to the downward revision.

According to the latest Oil Market Report released by the IEA, global oil consumption has continued to experience a slowdown in growth momentum with first-quarter growth estimated at 1.6 million bpd.

This figure falls short of the IEA’s previous forecast by 120,000 bpd, indicating a more sluggish demand recovery than anticipated.

With much of the post-Covid rebound already realized, the IEA now projects global oil demand to grow by 1.2 million bpd in 2024.

Furthermore, growth is expected to decelerate further to 1.1 million bpd in the following year, reflecting ongoing challenges in the market.

This revision comes just a month after the IEA had raised its outlook for 2024 oil demand growth by 110,000 bpd from its February report.

At that time, the agency had expected demand growth to reach 1.3 million bpd for 2024, indicating a more optimistic outlook compared to the current revision.

The IEA’s latest demand growth estimates diverge significantly from those of the Organization of the Petroleum Exporting Countries (OPEC). While the IEA projects modest growth, OPEC maintains its forecast of robust global oil demand growth of 2.2 million bpd for 2024, consistent with its previous assessment.

However, uncertainties loom over the global oil market, particularly due to geopolitical tensions and supply disruptions.

The IEA has highlighted the impact of drone attacks from Ukraine on Russian refineries, which could potentially disrupt fuel markets globally.

Up to 600,000 bpd of Russia’s refinery capacity could be offline in the second quarter due to these attacks, according to the IEA’s assessment.

Furthermore, unplanned outages in Europe and tepid Chinese activity have contributed to a lowered forecast of global refinery throughputs for 2024.

The IEA now anticipates refinery throughputs to rise by 1 million bpd to 83.3 million bpd, reflecting the challenges facing the refining sector.

The situation has raised concerns among policymakers, with the United States expressing worries over the impact of Ukrainian drone strikes on Russian oil refineries.

There are fears that these attacks could lead to retaliatory measures from Russia and result in higher international oil prices.

As the global oil market navigates through these challenges, stakeholders will closely monitor developments and adjust their strategies accordingly to adapt to the evolving landscape.

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