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OPEC Once Again Lowers Oil Demand for 2021

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OPEC Once Again Lowers Oil Demand for 2021

The Organisation of Petroleum Exporting Countries (OPEC), projected yesterday that world oil demand in 2021 will rebound more slowly than previously thought but added that it will pick up in the second quarter of this year.

The international oil cartel also forecasted that the prevailing rise in oil prices could brighten early economic recovery for the country, resulting in a medium-term Gross Domestic Product (GDP) expansion.

In its monthly report for February, OPEC projected that demand will rise by 5.79 million barrels per day (bpd) this year to 96.05 million bpd, trimming its growth forecast by 110,000 bpd from a month ago.

The prospect of weaker demand has already prompted OPEC and its allies, known as OPEC+, to slow their plan to boost output.

But more demand, rising prices, and lower rival supply could support the case for more easing, even as Iraq said on Wednesday OPEC+ was likely to keep current cuts in March.

“While the global economy is showing signs of a healthy recovery in 2021, oil demand is currently lagging but is forecast to pick up in the second half of 2021,” OPEC said in the report.

OPEC has steadily lowered its 2021 oil demand growth forecast from 7 million bpd expected in July. Still, the latest forecast is stronger than the prediction made in an earlier internal OPEC report.

The group raised its forecast of world economic growth this year to 4.8 per cent from 4.4 per cent previously, despite the impact of “challenges” such as COVID-19 variants and the effectiveness of vaccines.

“The global vaccination rollout is gaining pace, infection rates are falling in some areas, improvements in treatment, and the growing use of rapid testing facilities all lend support to an acceleration of economic activity after the first quarter,” OPEC said.

On its forecast for Nigeria, it stated: “The meaningful rise in of oil prices following the recent Declaration of Cooperation (DoC) decisions, along with a positive trajectory from COVID-19 vaccines, could brighten the 2021 outlook and lay the groundwork for a hopeful medium-term real GDP expansion.

“Moreover recent data showed that consumer confidence in Nigeria increased to 14.80 points in 4Q20 from -21 20 points in 3Q20.

“ However, recent Central Bank of Nigeria composite Purchasing Managers Index (PMI) for the manufacturing sector edged down to 49.6 in December 2020 from 50.2 in November, signaling a renewed contraction in the country’s manufacturing activity.”

For shale, OPEC trimmed its non-OPEC supply growth forecast to 670,000 bpd this year from 850,000 bpd previously, and said output of U.S tight crude, another term for shale, would decline despite higher oil prices.

“Supply from the U.S. is challenged by short-term uncertainties around COVID-19 (and) continued capital expenditure discipline leading to lower upstream capital spending by U.S. oil companies,” OPEC said.

Last month, OPEC raised its forecast for U.S. shale output this year, in a sign higher oil prices were helping a key competitor.

OPEC+ producers cut supply by a record 9.7 million bpd last year to support the market and agreed to pump an extra 500,000 bpd in January under a plan to unwind the curbs gradually. Most producers are returning to supply restraint this month and in March.

OPEC crude production in January rose by 180,000 bpd to 25.50 million bpd, the report said, led by Saudi Arabia, Iran, and Venezuela. This is less than the 300,000 increase allowed under the OPEC+ plan for January.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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FG Earned $34.22B From Crude Oil and Gas in 2019 – NEITI

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The Nigeria Extractive Industries Transparency Initiative (NEITI) on Thursday released its 2019 oil and gas industry audit report, which shows that Nigeria earned N34.22 billion from the oil and gas industry in 2019.

The audit, conducted by Adeshile Adedeji & Co. (Chartered Accountants), an indigenous accounting and auditing firm, reconciled payments from 98 entities. They include 88 oil and gas companies, nine government agencies and the Nigerian Liquefied Natural Gas (NLNG).

The 2019 figure is an increase of 4.88 percent over the $32.63billion revenue realised from the sector in 2018. A breakdown of the earnings showed that payments by companies accounted for $18.90billion, while flows from federation sales of crude oil and gas accounted for $15.32billion.

The report further showed that 10 years (2010-2019) aggregate financial flows from the oil and gas sector to government amounted to $418.544billion, with the highest revenue flow of $68.442 recorded in 2011, while the lowest revenue flow of $17.055 was recorded in 2016.

According to NEITI, the total crude oil production in 2019 was 735.244mmbbls, representing an increase of 4.87 percent over the 701.101mmbbls recorded in 2018. Production sharing contracts (PSCs) contributed the highest volumes of 312.042mmbbls followed by Joint Venture (JV) and Sole Risk (SR) which recorded 310,284mmbbls and 89.824mmbbls respectively. Others are Marginal Fields (MFs) and Service Contracts (SCs) which accounted for 21,762mmbbls and 1,330mmbbls respectively.

The report also showed that total crude oil lifted in 2019 was 735.661mmbbls, indicating a 4.93 percent increase to the 701.090 mmbbls recorded in 2018, with companies lifting 469.010mmbbls, while 266.650mmbbls was lifted by the Nigeria National Petroleum Corporation (NNPC) on behalf of the federation.

Analysis of crude oil lifted by NNPC showed that 159.411mmbbls was for export, while 107.239mmbbls was for domestic refining. 97 percent of the volumes for domestic refining (104.475mmbbls) was utilised for the Direct Sale Direct Purchase (DSDP) programme while the remaining 3 percent (2.764mmbbls) was delivered to the refineries.

NEITI reported that the value of the 2019 domestic crude oil earnings was N2.722 trillion. Of this figure, N518.074billion was deducted for Petroleum Motor Spirit (PMS) under-recovery by the NNPC.

This figure was N213.074billon above the approved sum of N305billion for under-recovery in 2019. Similarly, the sum of N126.664billion was incurred by the Corporation as costs for pipeline repairs and maintenances which showed a difference of N96.378billion from the approved sum of N30.287billion for that purpose.

The report also pointed out that N31.844billion was also deducted for crude and product losses due to theft.

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Oil Prices Drop on Stronger U.S Dollar

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The strong U.S Dollar pressured global crude oil prices on Thursday despite the big drop in U.S crude oil inventories.

The Brent crude oil, against which Nigerian oil is priced, dropped by 74 cents or 1 percent to settle at $73.65 a barrel at 4.03 am Nigerian time on Thursday.

The U.S West Texas Intermediate crude oil depreciated by 69 cents or 1 percent to $71.46 a barrel after reaching its highest since October 2018 on Wednesday.

Energy markets became so fixated over a robust summer travel season and Iran nuclear deal talks that they somewhat got blindsided by the Fed’s hawkish surprise,” said Edward Moya, senior market analyst at OANDA.

The Fed was expected to be on hold and punt this meeting, but they sent a clear message they are ready to start talking about tapering and that means the dollar is ripe for a rebound which should be a headwind for all commodities.

The U.S. dollar boasted its strongest single day gain in 15 months after the Federal Reserve signaled it might raise interest rates at a much faster pace than assumed.

A firmer greenback makes oil priced in dollars more expensive in other currencies, potentially weighing on demand.

Still, oil price losses were limited as data from the Energy Information Administration showed that U.S. crude oil stockpiles dropped sharply last week as refineries boosted operations to their highest since January 2020, signaling continued improvement in demand.

Also boosting prices, refinery throughput in China, the world’s second largest oil consumer, rose 4.4% in May from the same month a year ago to a record high.

This pullback in oil prices should be temporary as the fundamentals on both the supply and demand side should easily be able to compensate for a rebounding dollar,” Moya said.

 

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Oil Rises as Threat of Immediate Iran Supply Recedes

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Oil prices rose on Tuesday, with Brent gaining for a fourth consecutive session, as the prospect of extra supply coming to the market soon from Iran faded with talks dragging on over the United States rejoining a nuclear agreement with Tehran.

Brent crude was up by 82 cents, or 1.13%, to $73.68 per barrel, having risen 0.2% on Monday. U.S. oil gained 91 cents, or 1.3%, to $71.79 a barrel, having slipped 3 cents in the previous session.

Indirect discussions between the United States and Iran, along with other parties to the 2015 deal on Tehran’s nuclear program, resumed on Saturday in Vienna and were described as “intense” by the European Union.

A U.S. return to the deal would pave the way for the lifting of sanctions on Iran that would allow the OPEC member to resume exports of crude.

It is “looking increasingly unlikely that we will see the U.S. rejoin the Iranian nuclear deal before the Iranian Presidential Elections later this week,” ING Economics said in a note.

Other members of the Organization of Petroleum Exporting Countries (OPEC) along with major producers including Russia — a group known as OPEC+ — have been withholding output to support prices amid the pandemic.

“Additional supply from OPEC+ will be needed over the second half of this year, with demand expected to continue its recovery,” ING said.

To meet rising demand, U.S. drillers are also increasing output.

U.S. crude production from seven major shale formations is forecast to rise by about 38,000 barrels per day (bpd) in July to around 7.8 million bpd, the highest since November, the U.S. Energy Information Administration said in its monthly outlook.

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