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Danger as Some Non-OPEC Members Still Over-produce Oil – Barkindo

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OPEC - Investors King
  • Danger as Some Non-OPEC Members Still Over-produce Oil

The Organisation of Petroleum Exporting Countries, OPEC has raised alarm that the volatile market remains under threat because of an alleged over-production of non-OPEC members.

The Secretary General of OPEC, Dr. Sanusi Barkindo disclosed in a presentation that the organisation has observed over-production from some nations, particularly the United States in recent times.

He said that in the January 2017 OPEC Monthly Oil Market Report, non-OPEC supply was anticipated to grow by 120,000 b/d in 2017.

Barkindo disclosed that in the April report, this number had risen to 580,000 b/d, driven mainly by expectations for rising growth in the US, as well as in Canada and Brazil. He pointed out that in the US alone, expectations for 2017 were for a decline of 150,000 b/d back in the November 2016 report, while in the April report it is now estimated to grow by 540,000 b/d.

Barkindo stated that in addition, it is important to remember that the fourth quarter of 2016 was a period of significantly rising supplies that were working their way through the market in the early part of 2017.

Market Rebalancing

According to him, non-OPEC increased its production by around 1.8 mb/d from September to November 2016, and over the same period, OPEC increased its production by about 500,000 b/d.

He said that this huge increase of 2.3 mb/d needs to be set against a global demand increase of just 200,000 b/d in the fourth quarter of 2016, compared to the third quarter.

“However, in recent weeks we have seen positive sentiment return, driven by expectations for further improvement in OPEC and non-OPEC conformity, which ended up at 98% in March, and signs that the market rebalancing is taking place. Total OECD commercial oil stocks in March fell by 23 mb, the second consecutive monthly drop. The total level is 275 mb above the latest five-year average, compared to 314 mb in February, and 356 mb in the same month in 2016.”

“It should be noted that across the first quarter of 2017, stocks built by 26 mb, which is much less than the seasonal average of 36 mb, even though refinery maintenance globally was much heavier. It is evident that the global inventory overhang of crude and oil products onshore is declining. Outside of the US, we believe the global trend of destocking is broadly on track. Moreover, we are also seeing numbers from industry stating that crude in floating storage has fallen by over 40 mb since the beginning of the year.”

“The US has evidently not been reflective of the rest of the world, given rising production there in the first quarter of 2017, but even here the market has now witnessed three consecutive weekly crude stock draws as refinery utilization has risen.

Meanwhile oil prices stepped below $52 a barrel yesterday as rising crude output and drilling in the United States countered OPEC led production cuts aimed at clearing a supply glut.

Baker Hughes Inc report shows that the number of oil rigs operating in U.S. fields rose by nine, the highest level in two years to 697 last week.

Also, Libya’s output rose to more than 700,000 barrels a day as the OPEC member’s biggest oil field and another field in its western region resumed pumping.

Analysts at JBC Energy, has said in a report, referring to the outlook for U.S. production, the U.S. rig count indicates that there is plenty more to come.

Global benchmark Brent crude for July was down 50 cents at $51.55 a barrel, in a public holiday-dominated session for Asia: Australia and Japan were the only major markets open, while U.S. crude for June was down 44 cents at $48.89 a barrel.

OPEC and participating non-OPEC countries meet on May 25 to discuss whether to extend the reduction. Given that inventories remain high and prices are half their mid-2014 level, OPEC members including top exporter Saudi Arabia support prolonging the curbs.

A board member of Libya’s National Oil Corp, Jadalla Alaokali, said that, “Libya’s Sharara field is currently producing 216,400 barrels a day, while the El Feel, or Elephant, deposit is pumping 26,500 and is expected to boost output further.

Zurich-based commodities analyst for UBS Group AG, Giovanni Staunovo, said that “The return of Libyan supply makes the job of OPEC more challenging. However, renewed supply disruption in Libya remains possible.” The improving sentiment was seen in a rise in WTI and Brent combined net-long positions, which reached over 751,000 contracts on April 18, from 670,000 on April 4,”

In another development, the World Bank, has forecast that the prices of crude oil will remain at $55 per barrel in 2017, adding that overall energy prices will increase by 26 percent same year.

The bank made this known in its latest Commodity Markets Outlook.

In the Outlook, the bank stated: “We expect supply to tighten in the current quarter as OPEC and non-OPEC production cuts start to affect global supply. In that, the institution differs from some energy analysts who are markedly bearish on oil prices. Based on this optimism, the World Bank expects crude prices to reach $60 a barrel next year – the price level that Middle Eastern producers would like to see sooner rather than later. Oil is unlikely to go much higher than this.”

The bank, however, argues that shale output increases will limit the upward potential of prices.

It stated: “ If shale production rises faster than the bank expects, this would put additional pressure on prices and would slow down the rebalancing of the market. It would also lower compliance with the OPEC deal, which is also a possibility as the current reductions in output are taxing for many producers’ budgets, and an extension could motivate some of them to cheat.”

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.

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Crude Oil

Oil and Gas Companies in Nigeria

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Nigeria is an oil reach nation with several oil and gas companies operating in Africa’s largest economy.  However, only ten oil and gas companies are listed on the Nigerian Exchange Limited (NGX).

Before we discuss in detail each of the listed oil and gas companies in Nigeria. A short background on Africa’s largest economy will help throw more light on the significance of the oil and gas companies or the entire oil sector to the Nigerian economy.

Nigeria is a petrol-dollar economy, which means Africa’s most populous nation, sells crude oil and use its proceed to service the economy. In fact, the Nigerian Naira is backed by crude oil like Canadian Dollar and other commodity-dependent economies.

But because the Central Bank of Nigeria (CBN) pegged the Naira against its global counterparts, the local currency does not reflect succinctly the fluctuation in global oil prices like other crude oil-dependent currencies.

Since global oil prices rebounded with the gradual reopening of economies, the oil and gas companies in Nigeria have also rebounded from the 2020 record low of $15 per barrel. The oil and gas sector has gained 62.76 percent from the year to date, according to the NGX Oil and Gas Index.

The index gauge price movements in 10 listed oil and gas companies in Nigeria.  However, there are several oil and gas companies in Nigeria not listed on the Nigerian Exchange Limited.

Oil and Gas Companies Listed on the Nigerian Exchange Limited (NGX)

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Crude Oil

Oil Prices Extend Gains on Friday After Saudis Dismiss Supply Concerns

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Oil

Oil prices extended gains on Friday after Prince Abdulaziz bin Salman, Saudi Energy Minister dismissed calls for more crude oil supply on Thursday.

Brent crude oil, against which Nigerian oil is priced, rose to $84.92 per barrel at around 8:31 am Nigerian time. The U.S West Texas Intermediate crude oil also responded positively to the comment, rising to $81.56 per barrel on Friday.

Prince Abdulaziz had stated on Thursday that OPEC plus efforts were enough to protect the oil market from wild price volatility seen in coal and natural gas markets.

“What we see in the oil market today is an incremental (price) increase of 29%, vis-à-vis 500% increases in (natural) gas prices, 300% increases in coal prices, 200% increases in NGLs (natural gas liquids) ….”

He further stated that the Organization of the Petroleum Exporting Countries and allies led by Russia, have done a “remarkable” job acting as “so-called regulator of the oil market,” he said.

“Gas markets, coal markets, other sources of energy need a regulator. This situation is telling us that people need to copy and paste what OPEC+ has done and what it has achieved.”

Prince Abdulaziz explained that OPEC plus will add 400,000 barrels per day in November and do the same in December and subsequent months. The increase will be gradual he said.

“We want to make sure that we reduce those excess capacities that we have developed as a result of COVID,” he said, adding that OPEC+ wanted to do it “in a gradual, phased-in approach”.

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Lack of Investment in Clean Energy Compromising Fight Against Climate Change and Poverty

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Renewable Energy - Investors King

New research highlights a chronic lack of finance that will leave billions of people in Sub-Saharan Africa and Asia without electricity or clean cooking by 2030; Urgent action to accelerate investment in clean energy for developing countries is needed from global leaders assembling at COP26 to ensure a just energy transition.

This year’s Energizing Finance research series – developed by Sustainable Energy for All (SEforALL) in partnership with Climate Policy Initiative (CPI) and Dalberg Advisors – shows the world is falling perilously short of the investment required to achieve energy access for all by 2030 for the seventh consecutive year.

In fact, tracked finance for electricity in the 20 countries that make up 80 percent of the world’s population without electricity – the high-impact countries – declined by 27 percent in 2019, the year before the onset of the Covid-19 pandemic. The economic strain caused by Covid-19 is expected to have caused even further reductions in energy access investment in 2020 and 2021.

Energizing Finance: Understanding the Landscape 2021, one of two reports released under the series, finds committed finance for residential electricity access fell to USD 12.9 billion in 2019 (from USD 16.1 billion in 2018) in the 20 countries. This is less than one-third of the USD 41 billion estimated annual investment needed globally to attain universal electricity access from 2019 to 2030.

Meanwhile, there is an abysmal amount of finance for clean cooking. Despite polluting cooking fuels causing millions of premature deaths each year and being the second largest contributor to climate change after carbon dioxide, only USD 133.5 million in finance for clean cooking solutions was tracked in 2019. This is nowhere near the estimated USD 4.5 billion in annual investment required to achieve universal access to clean cooking (accounting only for clean cookstove costs).

These findings have been released just ahead of COP26 in Glasgow, where global leaders will focus on how to spark meaningful progress on fighting climate change. As part of this, they will need to consider how to reduce global emissions from the energy sector while also increasing energy access in developing countries to support their economic development.

“We are at a critical moment in the energy-climate conversation,” said Damilola Ogunbiyi, CEO and Special Representative of the UN Secretary-General for Sustainable Energy for All and Co-Chair of UN-Energy. “What is clear is that the path to net zero can only happen with a just and equitable energy transition that provides access to clean and affordable energy to the 759 million people who have no electricity access and 2.6 billion people who lack access to clean cooking solutions. This requires resources to mitigate climate change and create new opportunities to drive economic development and enable people everywhere to thrive. Energizing Finance provides an evidence base of current energy finance commitments and the finance countries require to meet SDG7 energy targets.”

In 2018, 50 percent of total electricity finance flowed to grid-connected fossil fuels in the high-impact countries compared to 25 percent in 2019. While this is a positive trend for the climate, tracked investment in off-grid and mini-grid technology also declined and represented only 0.9 percent of finance tracked to electricity.

Dr. Barbara Buchner, Global Managing Director at CPI, who partnered with SEforALL on Energizing Finance: Understanding the Landscape 2021, said: “Achieving both the Paris Agreement and universal energy access requires far greater investment in grid-connected renewables and off-grid and mini-grid solutions than what has been tracked in Energizing Finance. These solutions are essential to helping high-impact countries develop their economies without a reliance on fossil fuels.”

To better illuminate the challenges high-impact countries face, the second publication in the series, Energizing Finance: Taking the Pulse 2021, offers a detailed look at the estimated volume and type of finance needed by enterprises and customers to achieve universal energy access for both electricity and clean cooking by 2030 in Mozambique, Ghana and Vietnam. Importantly, it illustrates the energy affordability challenges people face in these countries and the need for financial support for consumers, such as subsidies.

The report finds that providing access to clean fuels and technologies, i.e. modern energy cooking solutions, in Ghana, Mozambique and Vietnam will cost a total of USD 37-48 billion by 2030; 70 percent of which will be for fuels (e.g., LPG, ethanol and electricity). A more achievable scenario would be for all three countries to deliver universal access to improved cookstoves at a total cost of USD 1.05 billion by 2030.

“Ghana, Mozambique and Vietnam each have unique challenges to achieving universal access to electricity and clean cooking,” said Aly-Khan Jamal, Partner at Dalberg Advisors, who partnered with SEforALL on Energizing Finance: Taking the Pulse 2021. “This research digs deep into these national contexts to identify solutions that can make Sustainable Development Goal 7 a reality.”

Providing results-based financing for energy project developers and exploring policies that facilitate demand-side subsidy support and reduce taxes on solar home systems are among several policy recommendations presented for Ghana, Mozambique and Vietnam.

Energizing Finance also advocates for increased innovation in financial instruments to reach the scale of finance needed for universal clean cooking access; for integration of electricity access, cooking access and climate change strategies; and for national governments, bilateral donors, philanthropies, and DFIs to all increase their efforts to mobilize commercial capital to Sub-Saharan African countries.

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