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Tighter Supply Outlook Shores up Crude Oil Prices to $75

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  • Tighter Supply Outlook Shores up Crude Oil Prices to $75

Crude oil prices rose Monday with the global benchmark, Brent crude settling at $75 per barrel, as traders kept the focus on global supply disruptions and the effects of the United States’ sanctions on Iran.

The price of Brent crude was actually up 76 cents at $75.52 per barrel, while the US West Texas Intermediate (WTI) crude rose by $1.51 to settle at $70.21 per barrel.

Despite the hike in crude oil production by 70,000 barrels per day to 32.64 million barrels per day in July, the highest in 2018, the price of oil has risen in recent weeks.

Reuters reported that the prices remain buoyed by a tight supply outlook, with global inventories down from record highs in 2017 and US inventories at a three-year low.

The supply of crude oil to the international market has suffered disruptions in the Middle East.

Saudi Arabia last week said it was suspending oil shipments through the Red Sea’s Bab al-Mandeb strait, one of the world’s most important sea routes for crude oil, after Yemen’s Iran-aligned Houthis attacked two ships in the waterway.

Oil traders said prices pulled back after information supplier, Genscape reported that inventories at Cushing, Oklahoma, the delivery hub for US crude, rose almost 200,000 barrels, or nearly one per cent, from Tuesday to Friday last week.

But the prices have rebounded from recent lows over the last two weeks, as looming sanctions on Iran have already started to curtail exports from that country.

Supporting prices is the possibility that the United States might re-impose sanctions on Iran, OPEC’s third-largest producer, which could result in further supply reductions from the Middle East.

OPEC had on November 27, 2015, decided to pump as much as it could to defend market share, an action that sent the price of oil to a low of $27 per barrel in February 2016.

But following the drop in oil price to an all-time low, OPEC and other major producers, including Russia started to withhold output in 2017 to rein in oversupply that had depressed prices since 2014.

OPEC’s main objective for the cuts is to eliminate a global surplus in oil stocks and re-balance the market.

OPEC, together with Russia and a group of other producers, last November extended an output-cutting deal to cover all of 2018.

The initial deal, under which OPEC and non-OPEC producers are cutting supply by about 1.8 million barrels per day, had expired in March 2018.

The production-cutting pact between the OPEC, Russia and other producers has given strong tailwind to oil prices

However, the cartel and its allies agreed last month to boost supply as US President Donald Trump urged producers to offset losses caused by new US sanctions on Iran and to dampen prices, which had hit $80 per barrel earlier this year, the first time since 2014.

On June 22-23, OPEC, Russia and other non-members agreed to return to 100 per cent compliance with oil output cuts that began in January 2017, after months of underproduction in Venezuela and elsewhere pushed adherence above 160 per cent.

Saudi Arabia said the decision would translate into an output rise of about one million bpd.

OPEC’s collective adherence with supply targets has slipped to 111 per cent in July from a revised 116 per cent in June, the survey found, meaning it is still cutting more than agreed.

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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