- Goldman Sachs Warns of Another Oil Glut in 2018
Leading global investment banking firm, Goldman Sachs, had warned that another downturn in global oil prices could come over the next three years, sparked by a new wave of supply stemming from mega projects that were planned years ago.
It stated that these projects cost billions of dollars and take many years to bring online, and that many of them were initiated back when oil prices traded at $100 per barrel.
“2017 to 2019 is likely to see the largest increase in mega projects production in history, as the record 2011-13 capex commitment yields fruit. This long-lead-time wave of projects and a short-cycle revival, led by United States shales, could create a material oversupply in 2018-19,” Goldman Sachs said in a note.
Reported by oilprice.com, Goldman identified a handful of projects in Brazil, Russia, Canada and the Gulf of Mexico that will reach completion and add to global supply between 2017 and 2019. It explained that combined with the new shale output, these projects could add another one million barrels per day next year to the global oil stock.
The investment bank also warned that the markets have become overly optimistic on oil prices since the Organisation of Petroleum Exporting Countries (OPEC) deal was announced nearly four months ago, adding that shale output could come in higher than expected this year, thus disappointing those expecting higher oil prices.
Similarly, reports indicate most European integrated companies are using a working assumption for their budgets that oil prices will average $60 per barrel in 2017, with an upper end bound of $80 per barrel between 2018 and 2020, all of which are in sharp contrast to Goldman’s projections of oversupply for the next three years.
According to another research note shared by investment bank, Jefferies, OPEC’s market intervention which has reportedly taken about one million barrels per day of oil off the market has not succeeded in reversing a bearish trend for oil inventories.
While oil prices are heading down again on swelling United States crude oil inventories, with Brent dropping below $50 per barrel for the first time this year, Jefferies stated that: “OPEC’s market intervention has not yet resulted in significant visible inventory draw-downs, and the financial markets have lost patience.”
Also commenting on the development, Ole Hansen, Head of Commodity Strategy at Saxo Bank said: “OPEC has used up most of its arsenal of verbal weapons to support the market. One hundred per cent compliance by all is the only tool they have left, and on that account they are struggling.”
With the OPEC deal at its midway point in execution, experts indicate that focus was already shifting towards an extension of the cuts through the end of the year.
Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd
The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.
The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.
The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.
The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.
Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.
The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.
Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins
Oil Prices Recover from 4 Percent Decline as Joe Biden Wins
Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.
This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.
Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.
On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.
“Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.
“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”
The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.
“There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.
“Either you’re crimping energy demand or consumption behavior.”
Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020
Revenue of OPEC Members to Drop to 18 Year Low in 2020
The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.
EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.
“If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.
The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.
It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.
It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.
“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”
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