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Global Energy Investment Slumped 12% to $1.7trn in 2016

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  • Global Energy Investment Slumped 12% to $1.7trn in 2016

The world’s total energy investment was $1.7 trillion in 2016, having dropped by 12 per cent from 2015 in real terms and accounted for 2.2 per cent of global gross domestic product (GDP), World Energy Investment 2017 has revealed.

The WEI, a publication of International Energy Agency, which was released in July, noted that increase in spending on energy by nine per cent with six per cent rise in electricity networks were more than balance a continuing drop in investment in upstream oil and gas, which fell by over a quarter, and power generation, down five per cent.

According to the report, “Falling unit capital costs, especially in upstream oil and gas, and solar photovoltaics (PV), was a key reason for lower investment, though reduced drilling and less fossil fuel-based power capacity also contributed.”

Pointing out that, “The electricity sector edged ahead of the fossil fuel supply sector to become the largest recipient of energy investment in 2016 for the first time ever,” WEI disclosed that, “Oil and gas represent two-fifths of global energy investment, despite a fall of 38 per cent in capital spending in that sector between 2014 and 2016.”

“As a result, the low-carbon components, including electricity networks, grew their share of total supply-side investment by twelve percentage points to 43 per cent over the same period,” it added.

The WEI reported that China remained the largest destination of energy investment, taking 21 per cent of the global total. “With a 25 per cent decline in commissioning of new coal-fired power plants, energy investment in China is increasingly driven by low-carbon electricity supply and networks, and energy efficiency. Energy investment in India jumped 7 per cent, cementing its position as the third-largest country behind the United States, owing to a strong government push to modernise and expand India’s power system and enhance access to electricity supply.”

According to the report, “The rapidly growing economies of Southeast Asia together represent over 4 per cent of global energy investment. Despite a sharp decline in oil and gas investment, the share of the United States in global energy investment rose to 16 per cent – still higher than that of Europe, where investment declined 10 per cent – mainly as a result of renewables.”

On key trends in energy investment by sector, WEI pointed out that, after a 44 per cent plunge between 2014 and 2016, upstream oil and gas investment has rebounded modestly in 2017.

“A 53 per cent upswing in US shale investment and resilient spending in large producing regions like the Middle East and the Russia Federation (hereafter, “Russia”) has driven nominal upstream investment to bounce back by six per cent in 2017 (a three per cent increase in real terms). Spending is also rising in Mexico following a very successful offshore bid round in 2017.

“There are diverging trends for upstream capital costs: at a global level, costs are expected to decline for a third consecutive year in 2017, driven mainly by deflation in the offshore sector, although with only three per cent decline, the pace of the plunge has slowed down significantly compared to 2015 and 2016. The rapid ramp up of US shale activities has triggered an increase of US shale costs of 16 per cent in 2017 after having almost halved from 2014-16,” it stated.

Similarly, WEI revealed that global electricity investment fell just below one per cent to $718 billion, with an increase in spending on networks partially making up for a drop in power generation. “Investment in new renewables-based power capacity, at $297 billion, remained the largest area of electricity spending, despite falling back by three per cent. Renewables investment was three per cent lower than five years ago, but capacity additions were 50 per cent higher and expected output from this capacity about 35 per cent higher, thanks to declines in unit costs and technology improvements in solar PV and wind. Investment in coal-fired plants fell sharply, with nearly 20 gigawatts (GW) less commissioned, reflecting concerns about local air pollution and the emergence of overcapacity in some markets, notably China, though investment grew in India. The investment decisions taken in 2016, totalling a mere 40 GW globally, signal a more dramatic slowdown ahead for coal power investment once the current wave of construction comes to an end.

Nevertheless, the report further stated that, “Gas-fired power investment remained steady in 2016, but nearly half of it was in North America, the Middle East and North Africa where gas resources are abundant.”

According to the report, “In Europe, although 4 GW of new capacity came online based on investment decisions made years ago, retirements of gas-power plants exceeded the amount of new capacity that was given the green light for construction. The 10 GW of nuclear power capacity that came on line in 2016 was the highest in over 15 years, but only 3 GW started construction, situated mostly in China, which was 60 per cent lower than the average of the previous decade.”

“Spending on electricity networks and storage continued its steady rise of the past five years, reaching an all-time high of $277 billion in 2016, with 30 per cent of the expansion driven by China’s spending in the distribution system. China accounted for 30 per cent of total networks spending. Another 15 per cent went to India and South-east Asia, where the grid is expanding briskly to accommodate growing demand. In the United States (17 per cent of the total) and Europe (13 per cent), a growing share is going to the replacement of ageing transmission and distribution assets,” the report 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

Nigeria Pumps 236.2 Million Barrels in First Half of 2024

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Nigeria pumped 236.2 million barrels of crude oil in the first half of 2024, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

This figure represents an increase from the 219.5 million barrels produced during the same period in 2023.

In January, Nigeria produced 44.2 million barrels of crude oil while February saw a slight dip to 38.3 million barrels, with March following closely at 38.1 million barrels.

April and May production stood at 38.4 million barrels and 38.8 million barrels, respectively. June’s output remained consistent at 38.3 million barrels, demonstrating a stable production trend.

Despite the overall increase compared to 2023, the 2024 production figures still fall short of the 302.42 million barrels produced in the same period in 2020.

This ongoing fluctuation underscores the challenges facing Nigeria’s oil sector, which has experienced varying production levels over recent years.

On a daily basis, Nigeria’s crude oil production showed some variability. In January, the average daily production peaked at 1.43 million barrels per day (mbpd), the highest within the six-month period.

February’s production dropped to 1.32 mbpd, with a further decrease to 1.23 mbpd in March. April saw a modest increase to 1.28 mbpd, which then fell again to 1.25 mbpd in May. June ended on a positive note with a slight rise to 1.28 mbpd.

The fluctuations in daily production rates have prompted government and industry leaders to address underlying issues.

Mele Kyari, Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPC), has highlighted the detrimental effects of oil theft and vandalism on Nigeria’s production capabilities.

Kyari emphasized that addressing these security challenges is critical to boosting production and attracting investment.

Kyari also noted recent efforts to combat illegal activities, including the removal of over 5,800 illegal connections from pipelines and dismantling more than 6,000 illegal refineries.

He expressed confidence that these measures, combined with ongoing policy reforms, would support Nigeria’s goal of increasing daily production to two million barrels.

The Nigerian government remains focused on stabilizing and enhancing oil production. With recent efforts showing promising results, there is cautious optimism that Nigeria will achieve its production targets.

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Crude Oil

Oil Prices Steady Amid Mixed Signals on Crude Demand

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Oil prices remained stable on Thursday as investors navigated conflicting signals regarding crude demand.

Brent crude oil, against which Nigerian oil is priced, settled at $85.11 a barrel, edging up by 3 cents, while U.S. West Texas Intermediate (WTI) crude dipped by 3 cents to $82.82 a barrel.

The stability comes as the U.S. economy shows signs of slowing, with unemployment benefit applications rising more than expected.

Initial claims increased by 20,000 to a seasonally adjusted 243,000 for the week ending July 1, prompting speculation that the Federal Reserve might cut interest rates sooner than anticipated. Lower rates could boost spending on oil, creating a bullish outlook for demand.

Fed officials suggested that improved inflation and a balanced labor market might lead to rate cuts, possibly by September.

“Healthy expectations of a Fed rate cut in the not-so-distant future will limit downside,” noted Tamas Varga of oil broker PVM.

However, rising jobless claims signal potential economic easing, which could dampen crude demand.

John Kilduff of Again Capital highlighted the impact of a slowing economy on oil consumption despite a significant drop in U.S. crude inventories last week.

Global factors also weighed on the market. China’s economic policies remain steady, though details are sparse, affecting investor sentiment in the world’s largest crude importer.

Meanwhile, the European Central Bank maintained interest rates, citing persistent inflation.

An upcoming OPEC+ meeting in August is expected to assess market conditions without altering output policy, according to sources. This meeting will serve as a “pulse check” for market health.

Overall, oil prices are caught between economic concerns and hopes of a rate cut, maintaining a delicate balance.

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Crude Oil

Oil Prices Slide on China Demand Concerns, Brent Falls to $83.73

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Crude Oil - Investors King

Oil prices declined on Tuesday for the third consecutive day on growing concerns over a slowing Chinese economy and its impact on global oil demand.

Brent crude oil, against which Nigerian oil is priced, dipped by $1.12, or 1.3% at $83.73 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped $1.15, or 1.4%, to close at $80.76.

The dip in oil prices is largely attributed to disappointing economic data from China, the world’s second-largest economy.

Official figures revealed a 4.7% growth in China’s GDP for the April-June period, the slowest since the first quarter of 2023, and below the forecasted 5.1% growth expected in a Reuters poll.

This slowdown was compounded by a protracted property downturn and widespread job insecurity, which have dampened fuel demand and led many Chinese refineries to cut back on production.

“Weaker economic data continues to flow from China as continued government support programs have been disappointing,” said Dennis Kissler, Senior Vice President of Trading at BOK Financial. “Many of China’s refineries are cutting back on weaker fuel demand.”

Despite the bearish sentiment from China, there is a growing consensus among market participants that the U.S. Federal Reserve could begin cutting its key interest rates as soon as September.

This speculation has helped stem the decline in oil prices, as lower interest rates reduce the cost of borrowing, potentially boosting economic activity and oil demand.

Federal Reserve Chair Jerome Powell noted on Monday that the three U.S. inflation readings over the second quarter “add somewhat to confidence” that the pace of price increases is returning to the central bank’s target in a sustainable fashion.

This has led market participants to believe that a turn to interest rate cuts may be imminent.

Also, U.S. crude oil inventories provided a silver lining for the oil market. According to market sources citing American Petroleum Institute figures, U.S. crude oil inventories fell by 4.4 million barrels last week.

This was a much steeper drop than the 33,000 barrels decline that was anticipated, indicating strong domestic demand.

The International Monetary Fund (IMF) also weighed in, suggesting that while the global economy is set for modest growth over the next two years, risks remain.

The IMF noted cooling activity in the U.S., a bottoming-out in Europe, and stronger consumption and exports for China as key factors in the global economic landscape.

In summary, while oil prices are currently pressured by concerns over China’s economic slowdown, the potential for U.S. interest rate cuts and stronger domestic demand for crude are providing some support.

Market watchers will continue to monitor economic indicators and inventory levels closely as they gauge the future direction of oil prices.

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