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Not Yet a Threat, Kachikwu Insists



  • Not Yet a Threat, Kachikwu Insists

While reservations on the current trend in oil prices had been expressed by experts, Kachikwu however, stated that it was not yet that a trouble for Nigeria to lose sleep over.

Speaking in an interview on Arise News Network in Abuja, within the past week, the minister stated that the current downward movement in prices was not yet a threat to Nigeria’s economic recovery.

He said it would be alarmist to consider this a threat to the country’s economy, adding that Nigeria still sells most of its crude oil blends well above $50 per barrels.

Kachikwu also stated that member countries of OPEC were alert to the current price movements as well as the resurgence of shale oil production, and would react to the changes as required.

He explained that members of OPEC were already beginning to explore opportunities to engage US oil producers to join their efforts to stabilise prices, adding that he was optimistic the US would join the joint efforts of OPEC and non-OPEC members on price stability.

He also stated that Nigeria’s crude oil production was down to 1.7 million barrels a day (mbd) following scheduled maintenance works by Shell and ExxonMobil.

“I wouldn’t be that alarmist frankly. We are still in the $50 range; in fact some of our key product components are selling above $50 per barrel. Forcados is about $52, Bonny Light is about $51.5, so we are over and above the $50 threshold,” said Kachikwu in a response to a question on the country’s response to the drop in oil price.

Despite the derived price drop, Kachikwu said: “We have always projected that given the incentives that higher prices create for shale producers, it will see a spurn reaction, and let’s face it, the Trump presidency era creates a lot of incentives for people to go back into shale production, we’ve always anticipated that and we knew we were going to flip-flop in the $50 range.”

He further stated with optimism: “I expect as the winter season gets towards the end and a lot more consumption begins for those who do summer holidays, you are going to see movements in all that, my projection is that we, still, will end the year on an average of $54, $55 per barrel, that is one of the things OPEC is focused”.

“Bear in mind that Saudi Arabia and all the other producers in OPEC have always said that as we watch those numbers build, there is a need to take more drastic actions, and I think that is something we are taking very seriously.

“Over and above that, continuous engagement continues with the like of Russia, Mexico and the rest, and we are even beginning to look for windows of talking to the United States because it is in the long-term interest of everybody that there is stability in the price of oil.

“Bear in mind that the infrastructure for oil production is coming out of the US, this doesn’t just impact nations like Nigeria, it also impacts nations with huge technological input base into oil production and for that matter a lot of American oil companies are cut right in the web of this and their survival depends on the stability of this market. So, sooner or later, just like Russia did came on board, I am one of those who are optimistic that America will come on board,” he explained.

He stated that while US shale oil was still a challenge to OPEC members, their low production costs were still an advantage, adding that OPEC members could leverage this to hold on to a comfortable market share.

“I’ve been able to get everybody interested in maintaining some stability in oil price and so it is not a clobbering issue, it is work in progress, it is taking each season at a time and seeing what develops and at some points, even the shale producers are going to realise, just like what happened the last time, that the further the price drops, the lesser the ability to survive as a business entity, I think that these things will even out. The first salvos were fired by OPEC in the first cuts; there, probably, would be some more cuts that would follow both between OPEC and non-OPEC.

“But more important as I keep saying is that at the end of the day, the least cost producers are still the OPEC members and that is what we are pushing aside. As we focus on price increasing, the more critical thing that OPEC countries must begin to focus is on how they will ensure that prices remain the most least cost, and that is where countries like Nigeria is challenged and we need to do a lot more work in this, and we are working on that,” he noted.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend




Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.


  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return



Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather




Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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