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Oil Prices Gain Slightly on Monday

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Oil prices - Investors King

Global oil prices gained on Monday despite the cautionary nature of the oil market.

Brent crude oil, against which Nigerian oil is priced, gained 72 cents or 1.1 percent to $67.16 per barrel while the U.S West Texas Intermediate stood at $64.25 a barrel at 9:23 am Nigerian time on Monday.

Oil fell by 3 percent last week following Iran’s president, Hassan Rouhani’s announcement that the United States was ready to lift nuclear sanctions imposed on the Gulf nation.

“Iran’s oil production has been rising in recent months, likely in anticipation of a lifting of the sanctions,” ANZ analysts said in a note on Monday.

However, the speaker of Iran’s parliament said on Sunday that a three-month monitoring deal between Tehran and the U.N. nuclear watchdog had expired and that its access to images from inside some Iranian nuclear sites would cease.

Last week, European diplomats said failure to extend the monitoring agreement would plunge wider, indirect talks between Washington and Tehran on reviving the 2015 Iran nuclear deal into crisis. The people involved are due to resume discussions this week.

President Trump had suspended the nuclear agreement between Iran and World Powers immediately after he took over the White House, saying it was a poor deal that gave Iran too much power.

Despite oil prices hitting a record low in 2020 at the peak of COVID-19, the sanctions imposed on Iran helped ease global supply.  Suggesting oil prices could have been worse.

However, Goldman Sachs believes prices could hit $80 per barrel by the fourth quarter of 2021.

The leading investment bank explained that Iran will not hit its peak right away even if sanctions were lifted as widely expected.

Even aggressively assuming a restart in July, we estimate that Brent prices would still reach $80 per barrel in fourth quarter, 2021, with our new base case for an October restart still supporting our $80 per barrel forecast for this summer,” the bank said in a note.

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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Crude Oil

Oil Gains on Saudi Arabia Price Increase

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Crude Oil - Investors King

Crude oil rose on the back of Saudi Arabia’s announcement that it has increased January oil prices to Asian and US customers.

Brent crude oil, a global benchmark against which Nigerian oil is priced, appreciated to $71.90 a barrel on Monday at 12:12 pm Nigerian time after plunging to as low as $65.73 a barrel on Thursday.

Saudi Arabia on Sunday announced it had raised January official selling prices for all crude oil grades sold to Asia and the United States by up to 80 cents from the previous month.

This was on the same day reports from South Africa suggested that Omicron was less harsh than previously thought. Still, it was uncertain why one of the world’s leading oil producers raised prices at a time OPEC + is upping production by 400,000 barrels per day and when uncertainty surrounding covid could erode global demand and force existing buyers to embrace competing grades.

“I am struggling to construct a positive narrative out of Saudi Arabia raising prices, especially as it makes competing grades more appealing to their client base. The best I can do is that Saudi Arabia feels confident raising prices despite higher OPEC+ production because it believes omicron is a storm in a test tube and that the global recovery will not be derailed. The South African reports have reinforced that sentiment,” said Jeffrey Halley, Senior Market Analyst, Asia Pacific, OANDA.

US equity and Asian assets responded positively to Omicron’s report this morning, curbing further decline in the global assets from Friday’s decline. However, there is no certainty on the virus given the sample size. More research is needed to better understand the characteristics of the Omicron.

US Fed is now expected to raise interest rates twice in 2022 if it will curtail escalating inflation rate and compel more people to go back to work. Investors are now waiting for Friday’s consumer price report.

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Nigeria’s Oil Production Increase – Report

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The most recent monthly survey conducted by Reuters has revealed that the Organization of Petroleum Exporting Countries (OPEC) continued to increase its oil production in November under the OPEC+ agreement, but the organization went on pumping less crude oil than its share of the monthly increase just as Nigeria started to see an increase in production.

The country’s oil production had been short until last month when Shell Petroleum Development Company of Nigeria (SPDC) resumed crude exports from the Bonny Light terminal after repairs to a pipeline that had started leaking.

Issues with operation have hindered the country’s crude oil production throughout the second half of the year, with disturbances at other terminals including Forcados, Brass River, Erha, and Qua Iboe.

In the last few months, Nigeria’s production has been below the budgetary benchmark, dropping to 1.37 million barrels per day in October. That rate is 261,000 bpd (barrels per day) below the country’s OPEC+ quota.

Under the OPEC+, the 10 members of the Organization who have been bound by the OPEC+ agreement should be increasing their joint production by 254,000 bpd every month out of the total OPEC+ monthly supply addition of 400,000 bpd.

In November, OPEC’s oil production went up by 220,000 bpd to 27.74 million bpd according to the survey conducted by Reuters. That rise once again fell short of the 254,000 rise which OPEC is expected to implement.

The Reuters survey affirms a trend which began a few months ago, that not all members of the Organization have the ability to produce to their full quotas.

Saudi Arabia, which is OPEC’s top producer and the default leader, saw the biggest increase in production in November. The increase was in line with the country’s target, and the same was seen in Iraq which is OPEC’s second-largest oil producer.

Nigerian production managed a recovery in November from constraints seen in October, but other African oil producers kept on struggling to produce to their targets.

 

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Crude Oil Could Hit $150 a Barrel When Global Economy Fully Reopened

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Crude oil - Investors King

Crude oil price could skyrocket to $150 a barrel when the world economy fully reopened, according to Christopher Wood, the Head of Equity Strategy at Jefferies, an American multinational independent investment bank and financial services company headquartered in New York City.

Brent crude oil, against which Nigerian oil is priced, plunged to $67.46 a barrel on Tuesday amid the uncertainty surrounding the Omicron Covid variant. However, it pared losses on Wednesday, rebounding to $70.94 a barrel as of 3:03 pm Nigerian time.

In spite of about 21 percent decline in the value of the commodity in the last three trading sessions, Wood believed the commodity could rise to as much as $150 per barrel once the world economy fully reopened despite campaigns to halt the use of fossil fuel and embrace more environmentally friendly energy.

Explaining the modalities for his position, he said crude oil rose to over $80 a barrel with the partial reopening of the global economy, this he said was largely due to high demand for fossil fuels even without the usual investment incentives in the sector.

“Oil got to over $80 with a lot of Asia closed,” and China’s borders are effectively still closed, he said, in reference of Beijing’s strict zero-Covid approach. “In a really fully reopened world, the oil price could go to a $150 dollars because the supply constraints are dramatic.”

He claimed the political attack on fossil fuels in recent years was the reason incentive for investment in the sector dropped in spite of its lingering importance, adding that 84 percent of the world’s energy in 2020 was met by fossil fuels.

According to him, because nobody is really investing in fossil energy, supply constraints will continue to support prices, which could hit $150 a barrel.

“The issue for me is not the oil price, the issue is the pandemic. The oil price is gonna go higher in a fully reopened world because nobody’s investing in oil but the world still consumes fossil fuels,” he said.

“So oil can go much higher and that can definitely escalate an inflation scare,” Wood said.

 

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