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Crude Oil Slumps on Supply Concerns after Four Days of Gains

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OPEC - Investors King
  • Crude Oil Slumps on Supply Concerns after Four Days of Gains

Crude oil prices dropped yesterday ending a four-day winning streak amid concerns about the rising inventory in the global market as the Organisation of Petroleum Exporting Countries (OPEC) mulls production cuts.

Apart from the surplus inventory in the oil market, growing fears of an economic slowdown, which saw European and Asian stock markets tumble again, added further pressure on crude oil prices.

Reuters reported that the global Brent crude futures, the international benchmark for oil prices, were at $66.07 a barrel, down 72 cents, or 1.08 per cent, from their last close.

US West Texas Intermediate (WTI) crude futures were at $56.63 per barrel, down 57 cents, or one per cent.

Russian Energy Minister, Alexander Novak said on Monday that his country, which is not an OPEC member, planned to sign a partnership agreement with the group, and that details would be discussed at OPEC’s December 6 meeting in Vienna, Austria.

The plan by OPEC and Russia to cut supply to the international market followed an increased alarm that supply has started to outpace consumption.

US President Donald Trump had posted a tweet meant to put pressure on OPEC not to cut supply to prop up prices.

Trump’s tweet followed reports that Saudi Arabia was considering a production cut at the December OPEC meeting.

The United States’ sanctions against Iran, which took effect on November 4, are expected to reduce supply to the global market.

However, a US decision to grant waivers to some of Iran’s oil customers, who faced the prospect of a drop-off in supply from the sanctions, has also helped soothe concern about availability of crude.

The Head of Paris-based International Energy Agency (IEA), energy advisor to about 26 industrialised countries, Fatih Birol, said on Monday that oil supply cuts by key producers could have negative implications for markets.

He appealed to market players to use “common sense”.

Speaking at a news conference with central European energy ministers in Bratislava, Birol reportedly said markets were currently well supplied but spare capacity in Saudi Arabia was thin and cuts by key players could tighten markets.

“Currently markets are very well supplied but we should not forget that spare capacity in Saudi Arabia is very thin, therefore cutting the production significantly today by key oil producers may have some negative implications for the markets and further tightening the markets,” he said.

Birol yesterday warned of the effects of geopolitical instability on prices.

“We are entering an unprecedented period of uncertainty in oil markets,” Fatih Birol told a conference in Norway.

Oil prices are around a quarter below their recent peaks in early October, weighed down by surging supply, especially from the United States, as well as a slowdown in global trade.

US crude production has soared almost 25 per cent this year, to a record 11.7 million barrels per day (bpd).

Amid the uncertainty, financial traders have become wary of oil markets, seeing further downside risk to prices from the growth in U.S. shale production as well as the deteriorating economic outlook.

Portfolio managers have sold the equivalent of 553 million barrels of crude and fuels in the last seven weeks, the largest reduction over a comparable period since at least 2013.

Funds now hold a net long position of just 547 million barrels, less than half the recent peak of 1.1 billion at the end of September, and down from a record 1.484 billion in January.

Concerned about an emerging production overhang similar to the one that led to a price slump in 2014, OPEC is pushing for a supply cut of 1 million to 1.4 million bpd.

“We expect OPEC to agree to a supply cut at its next official meeting on December 6,” Reuters quoted French bank, BNP Paribas, as saying.

The bank added that it expected Brent to recover to $80 per barrel before the year-end.

“In 2019, we expect WTI to average $69 per barrel and Brent $76 per barrel,” BNP said.

The IEA, however, warned OPEC and other producers of the “negative implications” of supply cuts, with many analysts fearing a spike in crude prices could erode consumption.

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

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Crude Oil

Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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