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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.

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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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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Brent Crude Approaches $86 Following Moscow Attacks

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Brent crude oil - Investors King

Amid escalating geopolitical tensions following the devastating terrorist attacks in Moscow, global oil markets rose with Brent crude oil hitting a $86 price level.

The tragic events in the Russian capital, which claimed the lives of over 130 innocent civilians, sent shockwaves through international communities and rattled energy markets already grappling with supply uncertainties.

Speculation surrounding the attacks, claimed by the Islamic State but with hints of potential Ukrainian involvement from Russian President Vladimir Putin, intensified concerns about potential disruptions to oil supplies.

Also, ongoing drone strikes by Ukraine targeting Russian infrastructure further exacerbated worries about the stability of crude oil production and refining capabilities in the region.

The mounting geopolitical unrest in key oil-producing regions has injected a sense of urgency into the market, with investors closely monitoring developments for potential impacts on global supply and demand dynamics.

Despite recent fluctuations, crude oil is poised for a third consecutive monthly gain, buoyed by efforts from the OPEC+ alliance to maintain production cuts and bolstered by tightening US sanctions on Russian energy exports.

The bullish sentiment is further supported by positive commentary on the broader commodities outlook, with central banks signaling potential interest rate reductions to stimulate economic growth, thus underpinning industrial and consumer demand for raw materials.

Analysts remain cautiously optimistic about the trajectory of oil prices, citing a delicate balance between supply risks and supportive macroeconomic factors amidst the backdrop of geopolitical turmoil.

As Brent crude inches closer to the $86 threshold, market participants brace for continued volatility amid unfolding geopolitical developments.

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Indian Refiners Shun Russian Crude Carried by Sovcomflot Tankers Amidst US Sanctions

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Indian refiners have taken a bold stance by refusing to accept Russian crude oil carried on PJSC Sovcomflot tankers, citing stringent US sanctions.

This decision marks a significant shift in India’s energy strategy and underscores the profound impact of global politics on the oil trade.

The move comes in the wake of heightened scrutiny on Sovcomflot tankers following sanctions imposed by the US Treasury’s Office of Foreign Assets Control.

Designating Sovcomflot and identifying specific crude oil tankers, the US has intensified its efforts to clamp down on entities linked to Russia, particularly in the aftermath of the Ukraine invasion.

Indian Oil Corp., Bharat Petroleum Corp., Hindustan Petroleum Corp., Mangalore Refinery & Petrochemicals Ltd., and Nayara Energy Ltd. have all halted the acceptance of cargoes carried on Sovcomflot vessels.

This unified action underscores the severity of the situation, with refiners diligently scrutinizing tanker ownership to ensure compliance with sanctions.

The repercussions of this decision are reverberating throughout the oil market, leading to disruptions in the supply chain and altering trade dynamics.

With fewer tankers available to transport Russian crude, the pricing landscape has undergone a significant shift, with discounts narrowing to compensate for higher freight costs.

Despite the challenges posed by sanctions and supply chain disruptions, India remains a key player in the global oil market.

However, the decision to shun Russian crude on Sovcomflot tankers reflects a strategic recalibration in response to evolving geopolitical realities, underscoring the complex interplay between politics and energy security on the world stage.

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