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Saudi Arabia Says Oil Curbs Could Extend Beyond End of 2017

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Crude oil
  • Saudi Arabia Says Oil Curbs Could Extend Beyond End of 2017

Saudi Arabia’s oil minister said he’s confident that an agreement by producers to curb crude output and shrink a market glut will be extended into the second half of the year and possibly beyond.

While U.S. shale output growth and the shutdown of refineries for maintenance have slowed the impact of cuts by OPEC and its partners, producers are determined to reach their goal of reducing bloated stockpiles, Khalid Al-Falih said at the Asia Oil and Gas Conference in Kuala Lumpur on Monday. He said he’s confident the global oil market will soon rebalance and return to a “healthy state.”

Surging U.S. production has raised concern the Organization of Petroleum Exporting Countries and partners are failing to reduce an oversupply and prop up prices. Oil has surrendered all its gains since their deal late last year to cut output and with OPEC meeting in Vienna later this month, several nations have said they’d support an extension of the 6-month agreement that began in January. This is the first time the Saudi minister has suggested it could be extended beyond 2017.

“Based on the consultations I have had with participating members I am rather confident the agreement will be extended into the second half of the year and possibly beyond,” Al-Falih said. “The producer coalition is determined to do whatever it takes to achieve our target of bringing stock levels back to the five-year average.”

West Texas Intermediate crude rose 1 percent to $46.66 a barrel by 2:14 p.m. Singapore time on the New York Mercantile Exchange. Brent, the benchmark for more than half the world’s oil, was up 1 percent at $49.60 a barrel on the London-based ICE Futures Europe exchange. Both are still more than 50 percent below their peaks in 2014, when the U.S. shale boom exacerbated a market glut and triggered the biggest price crash in a generation.

“Given the extent of the over-hang I think they always knew the market was not going to rebalance in six months which is why our base case was always for a deal lasting at least one year, and if not longer,” said Virendra Chauhan, an analyst at industry consultant Energy Aspects Ltd. “Market expectations were lofty, and so OPEC will need to surprise the market with either a deeper cut, or possibly a longer than six-month extension to get prices to move higher.”

Failed Mission

Al-Falih said last month that OPEC and its partners have failed, after three months of limiting output, to achieve their target of reducing oil inventories below the five-year historical average. Group member United Arab Emirates said earlier in May that the producer group should extend the collective production cuts into the second half of the year when an expected upturn in demand will help to re-balance the crude market.

Russia, which is not member of OPEC but is part of the deal, also thinks it will be necessary to extend the reduction deal, according to Energy Minister Alexander Novak. The producers agreed last year to curb output by as much as 1.8 million barrels a day starting January. OPEC will meet in Vienna on May 25 to decide whether to prolong the deal beyond June.

While the producers curbed supply, production in the U.S., which is not part of the agreement, has risen to the highest level since August 2015 as drillers pump more from shale fields. But American crude inventories are showing some signs of shrinking, falling for the past four weeks from record levels at the end of March.

Global Demand

OPEC may have to extend its cuts for “some time” if shale pursues its relentless growth, Citigroup Inc. said in a report dated May 7. The central tenet behind the group’s decision to curb supply looks to be based on view that it’s a temporary measure, with global underinvestment in new capacity leading to a supply-gap in coming years, according to the bank. But that fails to see rapid growth in shale is displacing investment decisions that are higher up the cost-curve, the report said.

Despite lingering headwinds, the oil market is improving from early last year when markets were at a low, Al-Falih said. Stockpiles at sea have declined and U.S. inventories will continue their downward trend, he said. Global demand, meanwhile, will probably be stable from the “healthy rate” seen last year, driven by China and India, the Saudi minister said, adding that Asia was the most important market.

There’s about 20 million barrels a day of combined demand growth and natural oil-field output declines that need to be offset, Al-Falih said. “No matter how fast U.S. shale grows, it wont make a dent in that number,” 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

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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