- 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.
Nigeria, Morocco sign MOUs on Hydrocarbons, Others
The Federal Government and the Kingdom of Morocco have signed five strategic Memoranda of Understanding that will foster Nigerian-Morocco bilateral collaboration and promote the development of hydrocarbons, agriculture, and commerce in both countries.
The Minister of State for Petroleum Resources, Chief Timipre Sylva, led the Nigerian delegation to the agreement signing ceremony on Tuesday at Marrakech, Morocco, while the Chief Executive Officer of OCP Africa, Mr Anouar Jamali, signed for the Kingdom of Morocco, according to a statement by the Nigerian Content Development and Monitoring Board.
Under the agreement between OCP, NSIA and the Nigerian National Petroleum Corporation, Nigeria will import phosphate from the Kingdom of Morocco and use it to produce blended fertiliser for the local market and export.
The statement said Nigeria would also produce ammonia and export to Morocco.
“As part of the project, the Nigerian Government plans to establish an ammonia plant at Akwa Ibom State,” it said.
The Executive Secretary of NCDMB, Mr Simbi Wabote, and the Group Managing Director of NNPC, Mallam Mele Kyari, were part of the delegation and they confirmed that their organisations would take equity in the ammonia plant when the Final Investment Decision would be taken, the statement said.
Sylva said the project would broaden economic opportunities for the two nations and improve the wellbeing of the people.
He added that the project would also positively impact agriculture, stimulate the growth of gas-based industries and lead to massive job creation.
He said the President, Major General Muhammadu Buhari (retd.), had mandated the Ministry of Petroleum Resources and it agencies and other government agencies to give maximum support for the project.
“He mandated me to ensure that at least the first phase of this project is commissioned before the expiration of his second term in office in 2023,” he added.
According to the statement, the MOUs were for the support of the second phase of the Presidential Fertiliser Initiative; Shareholders Agreement for the creation of the joint venture company to develop the multipurpose industrial platform and MOU for equity investment by the NNPC in the joint venture and support of the gas.
Other agreements are term sheet for gas sales and aggregation agreement and MOU for land acquisition and administrative facilitation to the establishment of the multipurpose industrial platform for gas sales and aggregation agreement.
The NCDMB boss described the bilateral agreement as significant to the Nigerian economy as it would accelerate Nigeria’s gas monetisation programme through establishment of the ammonia plant in the country.
The agreement would also improve Nigeria’s per capita fertiliser application through importation of phosphate derivatives from Morocco, he added.
Wabote challenged the relevant parties to focus on accelerating the FID, assuring them that the NCDMB would take equity investment for long-term sustainability of the project.
He canvassed for the setting up of a project management oversight structure to ensure project requirements and timelines are met.
“There is also need to determine manpower needs for construction and operations phase of the project and develop training programmes that will create the workforce pool from Nigeria and Morocco and design collaboration framework between research centres in Nigeria and Morocco to develop technology solutions for maintaining the ISBL and OSBL units of the Ammonia complex,” he said.
Dangote Fertiliser Plant to Commence Shipment of Urea in March 2021
Dangote to Sells Petrol in Naira, Plans to Commence Urea Shipment in March 2021
The Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, has said Dangote Fertiliser Plant will commence shipment of Urea in March 2021.
The CBN governor disclosed this during an inspection tour of the sites of Dangote Refinery, Petrochemicals Complex Fertiliser Plant and Subsea Gas Pipeline at Ibeju Lekki, Lagos on Saturday.
Emefiele further stated that Dangote Refinery would sell refined petroleum products in Naira when it starts production.
This he said would save the country from spending 41 percent of the nation’s foreign exchange on importation of petroleum products yearly.
“Based on agreement and discussions with the Nigerian National Petroleum Corporation and the oil companies, the Dangote Refinery can buy its crude in naira, refine it, and produce it for Nigerians’ use in naira,” Mr Emefiele said.
“That is the element where foreign exchange is saved for the country becomes very clear. We are also very optimistic that by refining this product here in Nigeria, all those costs associated with either demurrage from import, costs associated with freight will be totally eliminated.”
Emefiele explained that this will make the price of Nigeria’s petroleum products affordable and cheaper in naira.
“If we are lucky that what the refinery produces is more than we need locally you will see Nigerian businessmen buying small vessels to take them to our West African neighbours to sell to them in naira.
“This will increase our volume in naira and help to push it into the Economic Community of West African States as a currency,” Mr Emefiele said.
UK Budget 2021: Will Sunak’s Budget Run Into Unintended Consequences?
Rishi Sunak’s Budget will encourage higher earners to consider their “international financial options” and will drive businesses away from the UK, warns the CEO of one of the world’s largest independent financial advisory and fintech organizations.
The warning from Nigel Green, chief executive and founder of deVere Group, comes as the Chancellor delivered his 2021 Budget in the House of Commons, his second since he took on the role.
Mr Green says: “The Chancellor has got an extraordinarily difficult hand to play as he tries to stem the economic damage caused by the pandemic, support jobs and businesses and, crucially, rebuild the public finances.
“Whilst Mr Sunak is being hailed a hero for the continued and unprecedented levels of support, it should also be remembered that he is – in a stealth move – dragging more people firmly into the tax net.
“He is raising taxes under the radar.
“Yes, there is no income tax rise. However, he is freezing personal tax thresholds, meaning as incomes rise and thresholds don’t, he is able to raise money by fiscal drag.”
Earlier this week, the deVere CEO noted: “Those most impacted by this stealth move will be looking at the financial planning options available to them, including international options, in order to grow and protect their wealth.”
Rishi Sunak also confirmed that corporation tax will increase to 25% from 2023, up from the current level of 19%.
Of this tax hike, Mr Green goes on to say: “Lower corporation tax helps job and wealth-creating business to survive and thrive. It also helps attract business to move and invest in the country.
“Instead of increasing taxes, Mr Sunak should have relentlessly focussed on growth and stimulus policies for businesses. This would have been of greater help to firms, the economy, jobs and, ultimately, the Treasury’s coffers.”
He adds: “Again, this corporation tax hike is likely to serve as a prompt for businesses to consider their overseas financial options.”
The deVere CEO concludes: “The Chancellor had to perform a tough juggling act. But stealthily dragging more people into the tax net and raising corporation tax might have negative, unintended consequences for the Treasury’s bottom line.”
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