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Brent Crude Oil Crosses $75 Per Barrel as Global Demand Recovers

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Crude oil prices sustained bullish runs amid rising demand for global oil and likely delay in Iranian crude supply to global oil market.

Brent crude oil, global benchmark for Nigerian oil, rose above $75 a barrel for the first time since 2019 on Tuesday as global investors remained bullish across the board.

Brent crude rose 26 cents or 0.4 percent to $75.16 a barrel as of 7 am Nigerian time on Tuesday.

The rebound has pushed up spot premiums for crude in Asia and Europe to multi-month highs.

“The market sentiment stays strong with improved outlook for global demand,” said Satoru Yoshida, a commodity analyst with Rakuten Securities, adding that a rally in Asian stock markets is also helping boost risk appetite among investors.

Global shares extended their recovery on Tuesday, with Asian markets bouncing from four-weeks lows as investor focus on economic growth partly offset worries about the U.S. Federal Reserve raising rates sooner than expected.

BofA Global Research raised its Brent crude price forecasts for this year and next, saying that tighter oil supply and recovering demand could push oil briefly to $100 per barrel in 2022.

Investors are looking to weekly U.S. inventory data as crude oil stockpiles have fallen for four weeks, said Toshitaka Tazawa, analyst at commodities broker Fujitomi Co.

U.S. crude stocks were expected to drop for the fifth consecutive week, while distillate and gasoline were seen rising last week, a preliminary Reuters poll showed on Monday.

“The oil prices are expected to hold a firm tone amid expectations that fuel demand will pick up quickly along with economic recovery in Europe and the United States,” Tazawa said.

The price gap between the world’s two most actively traded oil contracts narrowed to its lowest in more than seven months, demonstrating that U.S. oil output is still in the COVID-19 doldrums with the market likely to remain undersupplied.

Negotiations to revive the Iran nuclear deal took a pause on Sunday after hardline judge Ebrahim Raisi won the country’s presidential election.

Raisi on Monday backed talks between Iran and six world powers to revive a 2015 nuclear deal but flatly rejected meeting U.S. President Joe Biden, even if Washington removed all sanctions.

“The lower probability of Iranian crude oil returning to the market due to the new hardline president is also supporting the market,” Fujitomi’s Tazawa said.

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

Nigeria Records Zero Revenue from Oil Export in September

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Nigeria was unable to obtain any revenue from oil exports throughout the month of October, despite recording an average daily oil production of 1.4 million barrels in the month of September.

The Nigerian National Petroleum Corporation (NNPC) revealed this in the corporation’s report to the Federal Account Allocation Committee (FAAC) which was released over the weekend. The report, which was published on the corporation’s website confirmed that even though it had produced more than 1 million barrels of crude oil, it was unable to sell the oil.

This reminds one of 2019, where more than 104 million barrels of oil which were lifted were unable to be accounted for by the NNPC in an auditor general report that was released recently. The NNPC revelation is similar to the auditor general’s 2019 report, concerning why there was no record of any money received for more than the 104 million barrels of oil that had been lifted.

A part of the report reads: “Sales receipt: No Crude Oil export revenue for the month of September 2021.”

The report went ahead to note that in total, the NNPC crude oil lifting of 11.49 million barrels in Export & Domestic Crude in September 2021 saw an increase of 98.5 percent relative to the 5.79 million barrels lifted in August 2021.

In spite of the lack of revenue for the NNPC through oil exports, the report stated that a sum of N252.96 billion was the Gross Domestic Crude Oil and Gas revenue for October 2021.

In the report, NNPC stated that Domestic Gas and other receipts throughout the month sat as N6.78 billion. Domestic Gas (NGL) in the month was just over N4 billion.

Concerning expenses, the NNPC stated that strategic holding cost, pipeline repairs across the month of September took a total of N7.75 billion. It broke the expenses down, stating that the pipelines came at a cost of N143 million and a value shortfall of N163 billion.

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Oil Gains on Saudi Arabia Price Increase

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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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