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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.

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

Nigerian Oil Loses Ground to Cheaper US and Russian Crude

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Nigeria’s once-thriving oil industry is facing a significant challenge as traditional buyers increasingly turn to more affordable alternatives from the United States and Russia.

This shift has led to France emerging as the leading buyer of Nigerian crude, marking a significant change in the global oil market dynamics.

Top Nigerian crude grades like Bonny Light, Forcados, and Brass have long been favored by refineries in Europe and Asia due to their low sulfur content.

However, the country’s primary customers, including India and China, are now opting for cheaper US and Russian oil.

This trend poses a substantial risk to Nigeria, which relies on oil exports for more than half of its foreign exchange earnings.

Data from BusinessDay reveals a stark decline in India’s purchase of Nigerian crude. In the first quarter of 2024, India bought N1.3 trillion worth of Nigerian oil, a significant drop from the average of N2 trillion purchased between 2018 and 2021.

“Buyers are increasingly turning to cheaper alternatives, raising concerns for the country’s revenue stream,” said Aisha Mohammed, a senior energy analyst at the Lagos-based Centre for Development Studies.

The latest tanker-tracking data monitored by Bloomberg indicates that India is buying more American crude oil as Russian energy flows dwindle amid sanctions.

India’s state-owned oil refiners and leading private companies have increased their imports of US crude, reaching nearly seven million barrels of April-loading US oil. This shift is the largest monthly inflow since last May.

Russian crude flows to India surged following the invasion of Ukraine, making Russia the biggest supplier to the South Asian nation.

However, tighter US sanctions have stranded Russian cargoes, narrowing discounts, and prompting India to ramp up purchases from Saudi Arabia.

“Given the issues faced with importing Sokol in Russia, it’s no surprise that Indian refineries are turning toward US WTI Midland as their light-sweet alternative,” explained Dylan Sim, an analyst at industry consultant FGE.

As a result, France has overtaken the Netherlands to become the biggest buyer of Nigerian crude oil, purchasing products worth N2.5 trillion in the first quarter of 2024.

Spain and India occupied second and fourth positions, with imports valued at N1.72 trillion and N1.3 trillion respectively, as of March 2024.

The sluggish pace of sales for Nigeria’s May supplies highlights the market’s shifting dynamics. Findings show that about 10 cargoes of Nigerian crude for May loading were still available for purchase, indicating a reduced demand.

Rival suppliers such as Azeri Light and West Texas Intermediate have also seen price weaknesses, impacting Nigerian crude demand.

“We’ve got much weaker margins, so Nigeria’s crude demand is taking a hit,” noted James Davis, director of short-term oil market research at FGE.

Sellers seeking premiums over the Dated Brent benchmark have found the European market less receptive, according to Energy Aspects Ltd.

“May cargoes were at a premium that didn’t work that well into Europe, but lower offers have seen volumes move,” said Christopher Haines, EA global crude analyst. “Stronger forward diesel pricing is also helping.”

Some Nigerian grades are being priced more competitively, including Qua Iboe to Asia and Bonny Light to the Mediterranean or East, with the overhang slowly reducing, according to Sparta Commodities.

However, the overall reduced demand could lead to a decrease in revenue from oil exports, a major source of income for the Nigerian government.

“Reduced demand could lead to a decrease in revenue from oil exports, a major source of income for the Nigerian government,” warned Charles Ogbeide, an energy analyst with a Lagos-based investment bank.

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Brent Nears $80, WTI at $76 After Weekly Drop and OPEC+ Supply Move

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Oil prices steadied on Monday with Brent crude trading near $80 per barrel and West Texas Intermediate (WTI) hovering around $76.

This stabilization follows a 2.5% decline last week, spurred by OPEC+’s announcement to increase supply starting from the third quarter.

The market is now keenly awaiting a series of industry reports and a crucial decision from the Federal Reserve on interest rates.

Last week’s drop in oil prices was exacerbated by algorithmic trading, which intensified the market’s reaction to OPEC+’s decision.

The alliance’s move to restore supply comes after months of production cuts aimed at stabilizing prices amid fluctuating demand.

Traders are now looking ahead to monthly reports from OPEC and the International Energy Agency (IEA), scheduled for Tuesday and Wednesday, respectively.

These reports are expected to provide valuable insights into the current health and future outlook of the oil sector.

Also, the Federal Reserve’s mid-week announcement on interest rates is being closely watched.

Strong economic data and persistently high inflation have tempered expectations that the Fed will soon pivot to lower borrowing costs, a shift that could significantly impact market dynamics.

The oil market has been on a downward trend since early April, driven by a weakening demand outlook.

This bearish sentiment is reflected in the positioning of money managers, who have significantly reduced their net long positions on Brent crude to the least bullish levels in a decade, according to data going back to 2011. Similarly, net long positions for the US benchmark WTI have also declined.

Despite the overall downturn, certain segments of the refined products market, such as jet fuel, are showing signs of strength.

A resurgence in air travel, approaching pre-COVID-19 levels, is driving increased demand for jet fuel, offering a glimmer of optimism within the broader market.

Geopolitical factors continue to play a role in the oil market’s volatility. Tensions remain high in the Middle East, where an Israeli operation in Gaza resulted in the release of four hostages but also led to the deaths of over 200 Palestinians, according to the Hamas-run government media office.

Meanwhile, in Europe, far-right parties made significant gains in the European Parliament elections, adding another layer of uncertainty to the geopolitical landscape.

Trading volumes are expected to be thin during Asian hours due to holidays in mainland China and Hong Kong, which could contribute to lower liquidity and potential price swings.

As the market navigates these multifaceted challenges, the upcoming reports from OPEC and the IEA, along with the Federal Reserve’s decision, will be pivotal in shaping the near-term outlook for oil prices.

For now, traders and analysts alike will be watching closely to gauge the future direction of the market.

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Oil Prices Gain on Fed Rate Cut Hopes, Capped by OPEC+ Supply Increase

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Oil prices experienced an upward trend on Thursday, driven by growing expectations that the U.S. Federal Reserve might cut interest rates in September.

This optimism, however, was tempered by the OPEC+ decision to increase oil supply and the report of rising U.S. crude inventories.

Brent crude oil, against which Nigerian oil is priced, rose by 57 cents, or 0.7% to $78.98 per barrel while the U.S. West Texas Intermediate (WTI) crude oil increased by 62 cents, or 0.8% to $74.69 per barrel.

This follows a more than 1% gain on Wednesday, a recovery after nearly $8 per barrel drop over the five sessions through Tuesday.

Market sentiment was buoyed by a recent Reuters poll, conducted from May 31 to June 5, which revealed that nearly two-thirds of economists predict the Federal Reserve will lower interest rates in September.

Lower interest rates generally reduce borrowing costs, potentially boosting economic activity and, consequently, oil demand.

However, this optimism was partially offset by mixed signals from the U.S. economy. The U.S. services sector, which represents a significant portion of the country’s economic output, showed signs of growth in May following a contraction in April. This could influence the Fed’s decision on interest rates.

Despite the current rise, oil prices are still projected to decline by about 3% for the week. This forecast is influenced by the latest decisions from OPEC+, which includes members of the Organization of the Petroleum Exporting Countries (OPEC) and their allies.

The group agreed on Sunday to extend most of their existing oil output cuts into 2025. However, they also allowed for voluntary cuts from eight members to be gradually reversed starting in October.

“Oil markets have over-reacted to the mildly negative OPEC+ meeting outcome. Demand indicators have certainly softened somewhat recently, but are not falling off a cliff,” Barclays analyst Amarpreet Singh noted in a recent report.

OPEC Secretary General Haitham Al Ghais defended the latest adjustments to the OPEC+ oil output deal, expressing confidence in sustained strong demand.

Also, Russia’s Deputy Prime Minister Alexander Novak stated that global oil demand is expected to increase gradually, with no peak in sight in the near future.

Adding to the market’s bearish sentiment were recent U.S. inventory figures. Data from the U.S. Energy Information Administration showed that U.S. crude stocks rose by 1.2 million barrels in the week ending May 31, contrary to analysts’ expectations of a 2.3 million barrel drawdown.

Furthermore, Saudi Arabia’s decision to cut its official selling prices (OSP) for July crude amid falling Middle East crude benchmarks and weaker profit margins for Asian refiners has also influenced market dynamics.

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