- Oil Prices Shed 4% Amid Rising US-China-Hong Kong Tension
Oil prices dipped on Wednesday as tension brew between the two world’s largest economies over Hong Kong.
The Republic of China had concluded plans to impose new national security law on Hong Kong to prevent “splittism, subversion, terrorism, any behaviour that gravely threatens national security and foreign interference” in the semi-autonomous nation.
A decision many Hong Kong citizens frown against and immediately took to the street to protest. The US secretary of state, Mike Pompeo, immediately warned that the US will start treating Hong Kong as China if the nation’s lawmakers go-ahead to enact such law.
“No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground,” Mr Pompeo said on Wednesday.
Pompeo further stated that Hong Kong is ‘no long autonomous’ from China. A declaration many people believed could mean the city will no longer enjoy special treatments from the world’s largest economy and may force the US to impose similar trade sanctions to China on the world’s financial hub.
The Brent crude oil, against which Nigerian oil price is measured, declined by 4 percent to $33.76 per barrel on Thursday during the Asian trading session.
“Traders are concerned that expected recovery in [energy] demand may be delayed if U.S.—China—Hong Kong political tension grows, and hence is weighing in on prices,” Manish Raj, chief financial officer at Velandera Energy, told MarketWatch. “This timing impact is seen in [the] futures curve, whereby near months have declined while outer month contracts are holding steady.”
Also, the uncertainty surrounding OPEC plus production cuts continue to impact oil outlook as traders doubted Russia commitment to the 9.7 million barrels per day production cuts agreement reached in April.
“The July target is in line with the current OPEC+ deal, which has a record-breaking combined production cut of 9.7 [million barrels per day] among participants,” said Robbie Fraser, senior commodity analyst at Schneider Electric.
“However, some in the group are likely to voice support for extending cuts beyond July—particularly if the market remains clearly oversupplied amid lackluster summer driving demand,” he said in a daily note.
“Russia’s comments would suggest such an extension is unlikely for now, but ultimately even the group’s most skeptical members may change their stance depending on price evolution and market fundamentals,” said Fraser. “OPEC’s formal meeting next month will be key in determining the tentative path forward.” OPEC and its allies plan to meet on June 10 via videoconference.
COVID-19 Vaccine: Crude Oil Extends Gain to $48 Per Barrel on Wednesday
Oil prices rose further on Wednesday as hope for an effective COVID-19 vaccine and the news that the United States of America’s President-elect, Joe Biden has begun transition to the White House bolstered crude oil demand.
Brent crude oil, a Nigerian type of oil, gained 1.63 percent or 78 cents to $48.64 per barrel at 11:50 am Nigerian time on Wednesday.
The United States West Texas Intermediate (WTI) crude oil rose by 1.36 percent or 61 cents to $45.52 per barrel.
OPEC Basket surged the most in terms of gain, adding 3.16 percent or $1.37 to $44.75 per barrel.
This was after AstraZeneca, Moderna and Pfizer-BioNTech announced the positive results of their trials.
Moderna and Pfizer had claimed over 90 percent effective rate in trials while AstraZeneca said its COVID-19 vaccine was 70 percent effective in trials but could hit 90 percent going forward.
“The possibility of having a vaccine next year increases the odds that we’re going to see demand return in the new year,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
Also, the decision of President-elect Joe Biden to bring Janet Yellen, the former Chair of Federal Reserve, back as a Treasury Secretary of the United States is fueling demand and strong confidence across global financial markets.
“President-elect Biden’s cabinet choices, particularly Janet Yellen’s Treasury Secretary position, are adding to upside momentum across a broad space of asset classes,” said Jim Ritterbusch of Ritterbusch and Associates.
Seyi Makinde Proposes N266.6 Billion Budget for Oyo State in 2021
The Executive Governor of Oyo State, Seyi Makinde, has presented the Oyo State Budget Proposal for the 2021 Fiscal Year to the Oyo State House of Assembly on Monday.
The proposed budget titled “Budget of Continued Consolidation” was said to be prepared with input from stakeholders in all seven geopolitical zones of Oyo state.
Governor Makinde disclosed this via his official Twitter handle @seyiamakinde.
According to the governor, the proposed recurrent expenditure stood at N136,262,990,009.41 while the proposed capital expenditure was N130,381,283,295.63. Bringing the total proposed budget to N266,6444,273,305.04.
The administration aimed to implement at least 70 percent of the proposed budget if approved.
He said “The total budgeted sum is ₦266,644,273,305.04. The Recurrent Expenditure is ₦136,262,990,009.41 while the Capital Expenditure is ₦130,381,283,295.63. We are again, aiming for at least 70% implementation of the budget.”
He added that “It was my honour to present the Oyo State Budget Proposal for the 2021 Fiscal Year to the Oyo State House of Assembly, today. This Budget of Continued Consolidation was prepared with input from stakeholders in all seven geopolitical zones of our state.”
World Bank Expects Nigeria’s Per Capita Income to Dip to 40 Years Low in 2020
The World Bank has raised concern about Nigeria’s rising debt service cost, saying it could incapacitate the nation from necessary infrastructure development and growth.
The multilateral financial institution said the nation’s per capita income could plunge to 40 years low in 2020.
According to Mr. Shubham Chaudhuri, Country Director for World Bank in Nigeria, the decline in global oil prices had impacted government finances, remittances from the diaspora and the balance of payments.
Chaudhuri, who spoke during the 26th Nigerian Economic Summit organised by the Nigerian Economic Summit Group and the Federal Government, said while the nation’s debt is between 20 to 30 percent, rising debt service remains the bane of its numerous financial issues and growth.
“Nigeria’s problem is that the debt service takes a big part of the government revenue,” he said.
He said, “Crisis like this is often what it takes to bring a nation together to have that consensus within the political, business, government, military, civil society to say, ‘We have to do something that departs from business as usual.’
“And for Nigeria, this is a critical juncture. With the contraction in GDP that could happen this year, Nigeria’s per capita income could be around what it was in 1980 – four decades ago.”
Nigeria’s per capita income stood at $847.40 in 1980, according to data from the World Bank. It rose to $3,222.69 in 2014 before falling to $2,229.9 in 2019.
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