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Dangote Refinery Obligated To Buy 300,000 Bpd of NNPC’s Crude Oil – Kyari

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Nigeria Port-Harcourt refinery

Mele Kyari, group managing director (GMD) of the Nigerian National Petroleum Corporation (NNPC) has said that the Dangote Refinery must buy at least 300,000 barrels per day (bpd) of crude oil from the Corporation.

Kyari made this known on Wednesday during his presentation to the House of Representatives Committee on Finance interactive session on some burning issues affecting the oil industry.

He explained that NNPC’s equity shareholding interest in the Dangote Refinery which was procured at the instance of the corporation was designed to guarantee national energy security.

He stated that the equity interest was secured after due consideration of the national interest and the best possible options.

“We will have the right to 20 percent of production from this facility. We structured our equity participation on the basis that the refinery must buy at least 300,000 barrels of crude oil per day of our production. This guarantees our market at a period when every country is struggling to find a market for their crude oil’’ he explained.

Kyari clarified revenue projection for 2022-2024 Revenue Framework and provided a base oil price scenario in the medium term as follows: $57 per barrel for 2022, $61 per barrel for 2023 and $62 per barrel for 2024.

He explained that the assumptions were arrived at after a careful appraisal of the three-year historical dated Brent Oil Price average of $59.07 per barrel premised on Platts Spot Prices.

“Price growth is to be moderated by the lingering concerns over COVID-19, increased energy efficiency, switching due to increased utilization of gas and alternatives for electricity generation. These are reflected in the Medium Term Revenue Framework’’ Kyari said.

On the perennial issue of smuggling of petroleum products, the GMD implored the National Assembly to come to the aid of the Corporation in battling the menace, noting that the Corporation, based on the directive of President Muhammadu Buhari, had mobilised some Federal agencies like the Customs, the Economic and Financial Crimes Commission (EFCC), the Police, Civil Defence Corps and others, to find workable solutions to the menace.

Kyari spoke on the propriety of establishing NNPC retail stations in neighboring countries to curb the challenge of illegal haulage of petroleum products across the border, saying that though the NNPC once considered the option, it had to jettison the idea when it became imperative that the measure would be counterproductive.

According to him, people who are smuggling are not looking for officially priced petroleum products. He explained that going ahead to establish NNPC Retail stations would not yield the desired result since the people who take products across the border are not interested in selling at the official prevailing prices at approved stations but are interested in under-the-counter deals.

Chairman of the House Committee on Finance Abiodun James Faleke, in his remarks, commended the NNPC GMD for providing an in-depth explanation and insider perspective on some issues surrounding the operations of the NNPC and the Oil Industry stating: “You have made our day. The committee is better informed based on explanations provided by the GMD.”

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Crude Oil

Oil Prices Rise on U.S. Inventory Draws Despite Global Demand Worries

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Oil

Oil prices gained on Wednesday following the reduction in U.S. crude and fuel inventories.

However, the market remains cautious due to ongoing concerns about weak global demand.

Brent crude oil, against which Nigerian crude oil is priced, increased by 66 cents, or 0.81% to $81.67 a barrel. Similarly, U.S. West Texas Intermediate crude climbed 78 cents, or 1.01%, to $77.74 per barrel.

The U.S. Energy Information Administration (EIA) reported a substantial decline in crude inventories by 3.7 million barrels last week, surpassing analysts’ expectations of a 1.6-million-barrel draw.

Gasoline stocks also fell by 5.6 million barrels, while distillate stockpiles decreased by 2.8 million barrels, contradicting predictions of a 250,000-barrel increase.

Phil Flynn, an analyst at Price Futures Group, described the EIA report as “very bullish,” indicating a potential for future crude draws as demand appears to outpace supply.

Despite these positive inventory trends, the market is still wary of global demand weaknesses. Concerns stem from a lackluster summer driving season in the U.S., which is expected to result in lower second-quarter earnings for refiners.

Also, economic challenges in China, the world’s largest crude importer, and declining oil deliveries to India, the third-largest importer, contribute to the apprehension about global demand.

Wildfires in Canada have further complicated the supply landscape, forcing some producers to cut back on production.

Imperial Oil, for instance, has reduced non-essential staff at its Kearl oil sands site as a precautionary measure.

While prices snapped a three-session losing streak due to the inventory draws and supply risks, the market remains under pressure.

Factors such as ceasefire talks between Israel and Hamas, and China’s economic slowdown, continue to weigh heavily on traders’ minds.

In recent sessions, WTI had fallen 7%, with Brent down nearly 5%, reflecting the volatility and uncertainty gripping the market.

As the industry navigates these complex dynamics, analysts and investors alike are closely monitoring developments that could further impact oil prices.

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Oil Prices Climb as Markets Eye Potential US Rate Cuts in September

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Crude oil - Investors King

Oil prices rose during the Asian trading session today on speculation that the U.S. Federal Reserve may begin cutting interest rates as soon as September.

Brent crude oil, against which Nigerian oil is priced, increased by 32 cents to $82.95 a barrel, while U.S. West Texas Intermediate crude oil climbed 34 cents to $80.47.

The anticipation of rate cuts stems from recent U.S. inflation and labor market data indicating a trend towards disinflation and balanced employment, according to ANZ Research.

The Federal Reserve is set to review its policy on July 30-31, with expectations of holding rates steady but providing clues for potential cuts in September.

The potential rate cuts could stimulate economic activity, increasing demand for oil. This optimism has been partially offset by recent concerns over China’s slower-than-expected economic growth, which could dampen global oil demand.

President Joe Biden’s announcement to not seek re-election and endorse Vice President Kamala Harris had minimal impact on oil markets.

Analysts suggest that U.S. presidential influence on oil production is limited, although a potential Trump presidency could boost oil demand due to his stance against electric vehicles.

In response to economic challenges, China surprised markets by lowering key policy and lending rates. While these measures aim to bolster the economy, analysts remain cautious about their immediate impact on oil demand.

With OPEC+ production cuts continuing to support prices, the focus remains on the U.S. Federal Reserve’s next moves.

Any decision to cut rates could further influence oil prices in the coming months, highlighting the interconnectedness of global economic policies and energy markets.

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Dangote Refinery Clash Threatens Nigeria’s Oil Sector Stability

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Nigeria’s oil and gas sector is facing a new challenge as a dispute between Dangote Industries Limited and the Nigerian Midstream and Downstream Petroleum Regulatory Agency (NMDPRA) intensifies.

The disagreement centers on claims by NMDPRA that diesel from the Dangote Refinery contains high sulfur levels, making it inferior to imported products.

The $20 billion Dangote Refinery, located near Lagos, has the potential to process half of Nigeria’s daily oil output, promising to reduce dependency on foreign fuel imports and create thousands of jobs.

However, the recent accusations have cast a shadow over what should be a significant achievement for Africa’s largest economy.

Industry experts warn that the ongoing conflict could deter future investments in Nigeria’s oil sector.

“Regulatory uncertainty is a major disincentive for investors,” said Luqman Agboola, head of energy at Sofidia Capital. “Any factor affecting foreign investment impacts the entire value chain, risking potential energy deals.”

The regulatory body, led by Farouk Ahmed, maintains that Nigeria cannot rely solely on the Dangote facility to meet its petroleum needs, emphasizing the need for diverse sources.

This position has stirred controversy, with critics accusing the agency of attempting to undermine a vital national asset.

Amidst these tensions, energy analyst Charles Ogbeide described the agency’s comments as reckless, noting that the refinery is still in its commissioning stages and is working to optimize its sulfur output.

In response, Dangote Industries has called for fair assessments of its products, asserting that their diesel meets African standards.

The refinery’s leadership argues that certain factions may have ulterior motives, aiming to stifle progress through misinformation.

As the dispute continues, the broader implications for Nigeria’s oil sector remain uncertain. The outcome will likely influence not only domestic production but also the country’s standing in the global energy market.

Observers hope for a resolution that supports both industrial growth and regulatory integrity, ensuring stability in a sector crucial to Nigeria’s economy.

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