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Crude Oil Price Rises to Four-week High

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  • Crude Oil Price Rises to Four-week High

Oil futures extended a rise on fears of potential damage to the United States oil production from Hurricane Irma, as well as renewed demand for crude from restarted refineries in the Gulf Coast, according to MarketWatch.

West Texas Intermediate the US crude oil for October rose by 47 cents, or 0.9 per cent, to $49.13 a barrel, on track for its highest settlement level since August 9, according to FactSet data. Brent crude, the global benchmark gained 67 cents, or 1.2 per cent, to $54.05a barrel, trading around its highest level in over three months.

“Oil market participants have become used to tropical storms causing no lasting damage to the energy infrastructure. This may change now, prompting the market to price in something of an uncertainty premium. Many market participants viewed the latest fall in the WTI price as excessive in any case,” analysts at Commerzbank said in a note.

The upswing in crude prices marked a swift reversal from last week, when prices had languished in the wake of Hurricane Harvey. The storm knocked out more than 20 per cent of the US refining capacity, cutting demand for crude and weighing on prices.

Refining capacity has since started to come back online, providing support for crude. That, however, is weighing on gasoline prices that rallied last week as refineries shut down and created a short-term shortage. Gasoline for October delivery fell by 2.5 per cent to $1.657 a gallon.

At the same time, the market is preparing for potential disruptions to oil production in the Gulf of Mexico as the result of Hurricane Irma, which made landfall in the Caribbean earlier on Wednesday, and other brewing storms. If crude output is hindered by the new storms it would boost prices, the analysts said.

Oil prices have also responded positively to suggestions Tuesday by the Russian energy minister, Alexander Novak, that Russia and Saudi Arabia would be open to extending their output cut agreement.

“The strong cooperation of the leading oil producers in combating the ‘oil glut’ is making market participants hopeful that stocks may be quickly reduced, which is boosting the price rise,” the Commerzbank analysts said.

The Organisation of the Petroleum Exporting Countries—of which Saudi Arabia is the largest member—and 10 producers outside the cartel, including Russia, first agreed late last year to cap production at around 1.8 million barrels a day lower than peak Ocober. 16 levels, with the aim of reining in the global oil glut and sending prices higher.

The deal, which was extended in May until March 2018, has been undermined by falling compliance, growing US output and an unexpected surge in production from Libya and Nigeria—two member states exempted from the agreement because their oil industries had been damaged by civil unrest.

Analysts said they were looking ahead to official US data this week on crude inventory levels, which have fallen consistently in recent months, while cautioning that the information was likely to be less reliable than usual as a result of Harvey.

In other energy products, October natural gas rose by 1.4 per centto $3.014 per million British thermal units. Heating oil futures rose by 0.4 per cent, to $1.7548 a gallon.

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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Economy

Nigeria’s Plan to Review Oil Companies’ Gas Flaring Strategies

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Nigeria is ramping up its efforts to address environmental concerns in the oil and gas sector with a comprehensive plan to review gas flaring strategies of international and indigenous oil companies.

The Minister of State for Environment, Dr. Iziaq Salako, announced this initiative during a national stakeholders engagement meeting on methane mitigation and reduction held in Abuja, Investors King reports.

Gas flaring, a common practice in the oil industry, releases methane—a potent greenhouse gas—into the atmosphere, contributing to climate change and posing health risks to communities near oil facilities.

Nigeria aims to end routine gas flaring by 2030, aligning with global climate goals and commitments.

Dr. Salako explained the importance of reducing methane emissions and highlighted the detrimental effects on public health, food security, and economic development.

He outlined practical steps being taken to tackle methane emissions, including the development of methane guidelines and the engagement of government institutions.

The ministry, through the National Oil Spill Detection and Response Agency, will conduct periodic reviews of oil companies’ plans to ensure compliance with the gas flaring deadline.

Deloitte management consultants will assist in conducting comprehensive forensic audits to scrutinize the legitimacy of forward-contracted transactions.

President Bola Tinubu’s commitment to environmental sustainability underscores the government’s dedication to addressing climate change and fulfilling its multilateral environmental agreements.

The engagement event served as a platform for stakeholders to discuss methane mitigation strategies, existing policies, and implementation challenges.

Collaboration and dialogue among diverse sectors are crucial in charting a unified course towards sustainable methane reduction in Nigeria’s oil and gas industry.

As the country navigates its environmental agenda, ensuring accountability and transparency in gas flaring practices remains paramount for achieving a greener and healthier future.

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Economy

Interest Rate Jumps to 24.75% as CBN Takes Aggressive Stance Against Inflation

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Dr. Olayemi Michael Cardoso

The Central Bank of Nigeria (CBN) has announced a significant increase in the monetary policy rate, known as the interest rate, to 24.75%.

This move disclosed by CBN Governor Olayemi Cardoso during the 294th Meeting of the Monetary Policy Committee press briefing in Abuja, represents a bold step by the apex bank to address the mounting inflationary pressures faced by the country.

With inflation soaring to 31.70% in February, the CBN aims to moderate this upward trend by tightening its monetary policy stance.

This decision follows the previous hike in the interest rate to 22.75% in February, showcasing the CBN’s commitment to combatting inflationary forces.

While the bank opted to maintain the Cash Reserve Ratio at 45%, the significant increase in the interest rate underscores the urgency of the situation and the need for decisive action.

Governor Cardoso emphasized that these measures are essential to stabilize the economy and safeguard the purchasing power of the Nigerian currency.

The 294th MPC marks the second meeting under Governor Cardoso’s leadership, indicating a proactive approach to addressing economic challenges.

The next MPC meeting is scheduled for May 20th and 21st, 2024, highlighting the ongoing commitment of the CBN to navigate Nigeria’s economic landscape amidst inflationary pressures.

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Nigeria Braces for 10th Consecutive Interest Rate Hike by Central Bank

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Central Bank of Nigeria (CBN)

As Nigeria grapples with persistently high inflation, the Central Bank of Nigeria (CBN) is gearing up to implement its tenth consecutive interest rate hike in a bid to curb the soaring prices and attract investment.

Analysts surveyed by Bloomberg are anticipating a substantial 125 basis-point increase in the key rate to 24%, marking one of the most significant adjustments in the current tightening cycle.

The decision, expected to be announced by Governor Olayemi Cardoso on Tuesday at 2 p.m. in Abuja, comes on the heels of inflation accelerating to 31.7% in February, far surpassing the central bank’s target range of 9%.

This surge has been primarily attributed to the sharp depreciation of the naira, prompting authorities to devalue the currency twice since June to narrow the gap with the unofficial market rate and encourage investor confidence.

While these measures have seen the naira strengthen in recent days and bolstered investment inflows, including a fourfold increase in overseas remittances and significant foreign investor portfolio asset purchases, there remains a palpable need for more decisive action.

Giulia Pellegrini, a senior portfolio manager at Allianz Global Investors, emphasized the necessity for the CBN to intensify its tightening efforts to regain foreign investors’ confidence in the local bond market.

While acknowledging the positive strides made by the central bank, Pellegrini stressed the importance of a more assertive approach to prevent the diversion of investor attention to other frontier markets.

As the Nigerian economy navigates through these challenging times, the impending interest rate hike signals the CBN’s determination to address inflation head-on and foster a more stable economic environment.

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