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Oil Prices’ll Stay at $40-60 Despite OPEC Cuts —Moody’s

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Moody's
  • Oil Prices’ll Stay at $40-60 Despite OPEC Cuts —Moody’s

Oil prices will continue to hover between $40 and $60 per barrel in 2018 despite the extension of the production cuts led by the Organisation of Petroleum Exporting Countries through the end of the year, Moody’s Investors Service has said in its 2018 credit trends report for the global oil and gas industry.

It said higher prices within or above that range would see supply growth as countries would lessen their compliance with production quotas and the US shale production continues to increase.

Abundant supplies of the US natural gas will constrain prices, even while demand goes up, according to the report.

“Political unrest in the Middle East, alongside assumptions of OPEC extending its agreement to cut production, helped to bolster oil prices in late 2017,” said the Moody’s Senior Vice President, Terry Marshall.

“Even with these factors offering a boost, prices will likely remain range-bound, and possibly volatile, on a combination of increasing the US shale production, reduced but still significant global supplies, and potential non-compliance with agreed production cuts — especially if demand growth is more tepid.”

After strong capital investment in 2017, North American exploration and production companies would focus on boosting capital returns in 2018, though greater capital discipline would rein in this growth thereafter, Moody’s said.

It said E&P companies would be aiming for profitable growth within existing oil acreage and cash flow, with improvement favouring companies with the greatest exposure to the best acreage and producers in the Permian Basin leading the way.

The credit rating agency said the global oilfield services industry would continue its recovery from the oil price slump in 2018, though the health of the sector would remain frail.

It said, “Higher utilisation of equipment would help improve pricing, but supply would align more closely with demand only later in the year, as current oversupply diminishes. Oilfield services companies will face ongoing pressures from customers, reactivation and upgrade expenses, and higher labour costs.”

According to Moody’s, mergers and acquisitions will be strategic and occur increasingly between larger companies across the oil and gas industry in 2018, following the 2017’s tactical asset acquisitions, divestitures, and swaps.

“Valuations will rein in larger mergers in the E&P sector, even as the M&A lags in the oilfield services and midstream sectors. Independent E&P firms will be particularly attractive to larger independent and integrated oil companies,” it 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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Economy

NLNG Boosts Cooking Gas Production to 1.5 Million Metric Tonnes Annually

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cooking gas cylinder

Nigeria Liquefied Natural Gas Limited (NLNG) has announced a significant milestone in its operations, boosting its annual production of liquefied petroleum gas (LPG), commonly known as cooking gas, to over 1.5 million metric tonnes.

This surge in production underscores NLNG’s commitment to meeting the rising demand for clean cooking energy in Nigeria.

The entirety of NLNG’s 1.5 million tonnes production is now being sold domestically within Nigeria.

Moreover, the company has initiated a landmark shift by starting to supply LPG in naira, moving away from the traditional practice of trading in United States dollars.

This move aligns with calls from stakeholders in the oil and power sectors advocating for naira transactions, especially amidst the challenges posed by currency fluctuations.

During a panel session at the 7th Nigeria International Energy Summit in Abuja, NLNG’s General Manager of Finance, Fatima Adanan, highlighted the company’s dedication to enhancing LPG penetration across the country.

Adanan emphasized NLNG’s vision to make Nigeria a better place by promoting the use of cleaner energy sources like gas.

While NLNG’s production surge is commendable, Adanan acknowledged that Nigeria’s LPG requirements surpass the current output, necessitating imports to bridge the gap.

However, NLNG remains committed to expanding its production capacity to meet the nation’s energy needs and drive increased adoption of LPG as a cleaner cooking fuel.

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Economy

CBN Raises Benchmark Interest Rate by 400 Basis Points to 22.75%

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Dr. Olayemi Michael Cardoso

The Central Bank of Nigeria (CBN) has raised the benchmark interest rate by 400 basis points to a record 22.75%.

The decision made by the Monetary Policy Committee (MPC) comes amidst rising inflationary pressures and growing uncertainty in Africa’s largest economy.

Nigeria’s inflation rate rose to 29.90% in January 2024, the highest in over two decades while the nation’s unemployment rate quickened to 5% in the third quarter of 2023. Suggesting that the rising costs have continued to drag on both new job creation and the existing ones.

This coupled with a series of policy adjustments implemented by President Bola Ahmed Tinubu has plunged economic productivity and eroded consumer spending as citizens grapple with high fuel prices, electricity tariffs, a record-high foreign exchange rate, and insecurities.

Therefore, it is surprising that the Monetary Policy Committee (MPC) led by the CBN will further increase borrowing costs by 400 basis points at a time when job creation is paramount.

While the economy reportedly grew by 3.46% in the fourth quarter (Q4) of 2023 on the back of robust performance of the services sector, this growth is yet to crystalise as businesses and citizens have taken to the street protest against the harsh economic situation.

Economic experts have started questioning the data from the National Bureau of Statistics (NBS) given its lack of correlation between the data and economic reality.

 

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Economy

President Tinubu Unveils Geometric Power Plant in Aba After 20-Year Wait

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Geometric Power Plant

After two decades of anticipation, President Bola Tinubu, through his representative Vice President Kashim Shettima, inaugurated the long-awaited Geometric Power Plant in Aba, a significant milestone in the city’s quest for reliable electricity supply.

The event, which also saw the commissioning of three rehabilitated roads by Abia State Governor Alex Otti, symbolizes the culmination of years of perseverance and determination to transform Aba’s power landscape.

Addressing the audience, Vice President Shettima hailed the project as a testament to the power of visionary leadership and unwavering commitment to progress.

He said the Geometric Power Plant exemplifies the transformative impact of strategic infrastructure investments on local communities.

Governor Otti echoed similar sentiments, emphasizing the importance of the power project in positioning Aba as a hub for national and international business ventures.

He commended the efforts of Geometric Power Limited while urging them to uphold transparency and avoid exploiting consumers.

The inauguration of the Geometric Power Plant comes amidst growing concerns over Nigeria’s power infrastructure and the need for sustainable solutions to address electricity shortages.

The project, with a capacity of 188MW, holds promise for significant improvements in power supply across Abia State, benefitting nine out of seventeen local government areas.

The Managing Director of Geometric Power Limited, Ben Caven, underscored the scale of investment involved, totaling $800 million.

He highlighted the comprehensive nature of the project, which includes the installation of new power substations and a 27km natural gas pipeline, signaling a comprehensive approach to enhancing Aba’s energy infrastructure.

In conclusion, the inauguration of the Geometric Power Plant represents a transformative moment for Aba, offering renewed hope for economic growth and prosperity powered by reliable electricity supply.

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