Crude Oil Rose Above $43 Per Barrel on Improved Demand
Global oil prices surged on Wednesday as global demand for the commodity improved.
The Brent crude oil, against which Nigerian crude oil is priced, increased from $42.68 per barrel it traded on Tuesday to $43.48 per barrel on Wednesday during the New York trading session.
The surge in prices was after OPEC and allies, known as OPEC plus, announced on Wednesday that they would restore part of capped crude oil production back to the oil market next month.
“As we move to the next phase of the agreement, the extra supply resulting from the scheduled easing of production cuts will be consumed as demand continues on its recovery path,” Saudi Energy Minister Prince Abdulaziz bin Salman said at the start of an OPEC+ video conference on Wednesday. “Economies around the world are opening up, although this is a cautious and gradual process. The recovery signs are unmistakable.”
OPEC plus had capped production by 9.7 million barrels per day in April and later reduced it to 7.7 percent earlier this month as more economies reopened for operations.
However, while the number of new COVID-19 cases continues to surge in the United States, the world’s largest economy, OPEC plus said demand for its commodity has risen in recent weeks, hence, the need to increase oil production.
Weak Chinese Data Drags on Crude Oil Prices
Oil prices extended their declines on Monday as weak Chinese data suggested possible slow demand
Oil prices extended their declines on Monday as weak Chinese data suggested possible slow demand for the commodity in the world’s largest importer of crude oil.
Brent crude, against which Nigerian oil is priced, declined by $1.14, or 1.2%, to $97.01 a barrel after shedding 1.5% on Friday. The U.S. West Texas Intermediate crude oil depreciated by $1.06, or 1.2% to $91.03 a barrel, after a 2.4% decline in the previous session.
The unexpected slowdown in the Chinese economy in the month of July weighed on refinery output. Refinery output slipped to 12.53 million barrels per day, the lowest since March 2020.
“The official data suggests that oil demand is weakening as domestic logistics and consumer demand are deterred by the record high oil pump prices,” said Heron Lin, an economist at Moody’s Analytics.
Oil demand could stay on the downtrend for the rest of the year as the threat of COVID-19 restrictions encourages precautionary savings and reduces oil consumption, he added.
Saudi Aramco stands ready to raise crude oil output to its maximum capacity of 12 million bpd if requested to do so by the Saudi Arabian government, Chief Executive Amin Nasser told reporters on Sunday.
“We are confident of our ability to ramp up to 12 million bpd any time there is a need or a call from the government or from the ministry of energy to increase our production,” Nasser said. He added that China’s easing of COVID-19 restrictions and a pickup in the aviation industry could add to demand.
Oil prices rebounded more than 3% last week after a damaged oil pipeline component disrupted output at several offshore Gulf of Mexico platforms and as investors pared back expectations for interest rate increases in the United States.
Producers had moved to reactivate some of the halted production after repairs were completed late Friday, a Louisiana official said.
Energy services firm Baker Hughes Co (BKR.O) reported on Friday that U.S. oil rig count rose by 3 to 601 last week. The rig count, an early indicator of future output, has been slow to grow with oil production only seen recovering from pandemic-related cuts next year.
Global oil markets remained supported by tight supplies in the run-up to EU sanctions on Russian crude oil and refined product supplies this winter. read more
More supplies could come if Iran and the United States accept an offer from the European Union to revive the 2015 nuclear deal, which would will lift sanctions on Iranian oil exports, analysts said.
Price of 5kg Cooking Gas Jumps Over 100% Year-on-Year
The price of Cooking Gas has witnessed a continual increase despite Nigeria’s huge deposit of the commodity.
In the past few months, the price of Liquefied Petroleum Gas (LPG) popularly known as Cooking Gas has witnessed a continual increase despite Nigeria’s huge deposit of the commodity.
The average retail price of a 5kg cylinder of cooking gas has increased over 100% in the last 12 months.
As at August 2021, cooking gas was sold at N2,250 per 5kg cylinder and now sells for N4,500 today, representing an increase of 100%.
A report from the Nigerian Bureau of Statistics (NBS) revealed that the average retail price for refilling a 5kg Cylinder grew by 7.57% on a month-on-month basis from N3,921.35 recorded in May 2022 to N4,218.38 in June 2022.
And on a year-on-year basis, the price of the commodity increased by 103.92% from N2,068.69 in June 2021.
Further analysis of the data revealed that prices are not uniform across the country. In Adamawa, a 5kg cylinder was refilled at N4,650.00, the highest in the country, according to the NBS report. Gombe followed with N4,566.67 and Niger came third with N4,540.
The states with the lowest average prices as of June were Zamfara with N3,700; Yobe at N3,820 and Kano at N3,875, respectively.
In addition, the North-Central recorded the highest average retail price for refilling a 5kg Cylinder of LPG (Cooking Gas) with N4,378.95, followed by the North-East with N4,301.48, while the North-West recorded the lowest with N3,994.57.
The continued surge in the price of cooking gas was not unique as prices of other deregulated petroleum products like kerosene and diesel also increased during the same period.
A local gas dealer in the Aboru area of Lagos States, Boluwatife Andero, who spoke with our correspondent, on Monday, said the price of cooking gas changes every two to three days.
He said, “The market is unpredictable. A kg of cooking gas was selling for N850 per kg as at Friday but this morning, it’s selling for N900 per kg”.
Equity markets are lacking any real direction in Asia and that appears to be carrying into the European session as well.
By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA
Europe is seeing minor losses on the open, offsetting some of the small gains in choppy trade at the start of the week. This follows a similarly choppy session in the US on Monday as the Dow flirted with exiting correction territory and the Nasdaq bear market territory.
We may have reached a point in which investors need to decide whether they truly buy into the recovery/no recession narrative or not. That is what appears to have fueled the recovery we’ve seen in equity markets despite the fact that inflation hasn’t even started falling, central banks are still hiking aggressively and recession is on the horizon for many.
It’s time to decide whether this is just a substantial bear market rally or a genuine view that the economic outlook is far less downbeat than many fear. If equity markets are going to push on from here, it must be based on the latter which I’m sure many would welcome but perhaps more through hope than expectation.
Don’t get me wrong, the US in particular still has plenty of reason to be encouraged. The data on Friday highlighted once more just how hot the labour market still is and the consumer is still in a very healthy position. But there are pockets of weakness as well and unless inflation starts to subside, those areas of strength will start to crack.
The inflation data on Wednesday could effectively set the mood for the rest of the summer. That seems quite dramatic but if we fail to see a drop in the headline rate, considering the acceleration we’re expected to see in the core, it could really take the wind out of the sails of stock markets as it would be very difficult for the Fed to then hike by anything less than 75 basis points in September.
Of course, there will be one further labour market and inflation report before the next meeting which will also have a big role to play. But the July data will be very difficult to ignore. If the rally is going to continue, we may need to see a deceleration in the headline rate at a minimum, perhaps even a surprise decline at the core level as well. It’s no wonder we’re seeing so much caution this week.
Oil edges lower as Vienna talks conclude
Oil prices are marginally lower on Tuesday after recovering slightly at the start of the week. All of the talk of recession has caught up with crude prices over the summer, forcing a substantial correction that will be welcomed by those looking on in horror as they fill their cars.
The question is how sustainable $90 oil is when the market remains very tight and OPEC+ is only willing to make small moves in order to address it. It’s comforting to know that Saudi Arabia and the UAE have spare capacity in case of emergency but I’m sure most would rather they actually use some of it considering many countries are facing a cost-of-living recession.
Nuclear deal talks in Vienna have concluded, with the EU suggesting a final text will now be put forward for the US and Iran to either agree on or reject. I’m not sure traders are particularly hopeful considering how long it’s taken to get to this point and with there still reportedly being points of contention. An agreement could ease further pressure on oil prices, the extent of which will depend on how quickly the country could then flood the market with additional crude.
Gold eyeing CPI data for breakout catalyst
Gold continues to trade around its recent highs ahead of Wednesday’s inflation report, with a softer dollar on the back of lower yields on Monday supporting the rally once more. The yellow metal continues to see significant resistance around $1,780-1,800 and we may continue to see that in the run-up to the CPI release. A softer inflation number tomorrow, particularly on the core side, could be the catalyst for a breakout to the upside while a stronger number could put $1,800 out of reach for the foreseeable future.
Bitcoin rallies losing momentum
Bitcoin is not generating the same momentum in its rallies in recent weeks, as it continues to run into strong resistance on approach to $25,000. In much the same way that US stock markets are lingering around potentially important levels ahead of the inflation data, we could see bitcoin behaving in a similar manner. A weaker inflation reading could be the catalyst it needs to break $25,000 and set its sights on the $28,000-32,000 region once more, where it hasn’t traded since the early part of the summer.
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