Global oil prices fell by 1 percent on Wednesday after data from the U.S. Energy Department showed that the United States oil inventories unexpectedly rose by 4.3 million barrels last week. More than the 1.9 million barrels predicted by experts.
The unexpected increase in United States inventories weighed on crude oil prices on Wednesday, erasing $1.31 or 1.5 percent from Brent crude oil after it rose to a seven-year high on Tuesday. While the U.S West Texas Intermediate (WTI) dipped by $1.09 or 1.3 percent to $83.56 a barrel.
Still, gasoline stocks declined by 2 million barrels across the United States, a situation likely to push pump prices even higher.
“The market continues to deplete Cushing crude oil inventories and that is impacting the Brent-WTI spread and ultimately we’re going to see crude oil diverted from the Permian up to Cushing rather than going to the Gulf Coast,” said Andrew Lipow, president of Lipow Oil Associates in Houston.
However, the shaky COVID-19 recovery in most economies has led to doubts over the sustainability of rising oil prices.
“(Some) countries are falling into an autumn Covid-19 case spike,” said Louise Dickson, senior oil markets analyst at Rystad Energy, “which poses downside risk for oil demand growth in the very near-term and could provide a soft pressure on oil prices.”
New COVID Variant: Brent Crude Sheds Over $10 to $72 Per Barrel
Brent crude oil extended decline by over $10 on Friday on concerns that a new COVID variant called B.1.1.529 could force economies to impose restrictions and slow down global demand.
Brent crude, against which Nigerian crude oil is measured, dropped from $82.55 per barrel it attained on Thursday to as low as $72.09 on Friday at 7:20 pm Nigerian time before it rebounded slightly to $72.98 per barrel as shown below.
Global financial markets plunged across the board following reports that two cases of the new heavily mutated COVID variant from South Africa have been reported in Hong Kong and that the United Kingdom, one of the most affected nations during COVID-19 with over 140,000 deaths has halted flights from six South African nations to prevent a potential breakout of the new COVID variant.
Experts are concerned that the new variant outbreak would slow down global growth and increase global risks going into the new year.
According to Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA, “Even without severe restrictions, people will adopt more caution which will weigh on demand, as OPEC+ has repeatedly stated and factored into their models.”
However, heavy crude oil-consuming nations like the United States, China and others that have been calling for more supply will now enjoy substantial price reduction if this continues, therefore, Joe Biden may not need to release millions of barrels into the global market.
“Crude is back at levels last seen at the start of October and if this risk aversion continues in the weeks ahead, there’s plenty of room to fall. While OPEC+ would likely have avoided altering production plans next week or in the months following in response to the SPR releases, it may soon feel its hand is being forced. Next week may come too soon but another major outbreak could see them slam on the brakes,” Craig Erlam added.
Concerns Over New COVID Variant Plunges Brent Crude Oil Below $80 a Barrel
Concerns over rising new COVID variant in South Africa, Asia and other regions weighed on Brent crude oil and other financial assets on Friday.
The heavily mutated COVID variant called B.1.1.529 plunged Brent crude oil, against which Nigerian crude oil is priced, by almost 4 percent on Friday to trade below $80 a barrel for the first in months.
Brent crude dropped $3.16 or 3.8 percent to $79.06 per barrel while the US West Texas Intermediate (WTI) sheds $3.45 or 4.4 percent to $74.94 a barrel.
“Oil prices have gapped lower in Asia as the South African variant sparks’ growth fears, sending a wave of selling through Asian energy markets. Although gas and coal prices are holding steady, oil prices have tumbled,” stated Jeffrey Halley, Senior Market Analyst, Asia Pacific, OANDA.
Commodity prices dropped after the United Kingdom announced it has halted all flights from six South African nations. In Hong Kong, two cases of the new variant were detected on Friday.
“With US markets closed for holidays, investors are voting with their feet this morning. The one bull in the China shop that could truly derail the global recovery has always been a new strain of Covid-19 that swept the world and caused the reimposition of mass social retractions.”
This was coming two days after U.S President Joe Biden announced his administration plans to release millions of barrels of oil from strategic reserves to cool rising crude oil prices and rein in fuel price in the world’s largest economy.
Global financial markets experts are worried that the new variant will slow down global growth and force economies to start shutting down following the U.K announcement on Thursday.
Today, investors across the world will be paying attention to the outcome of meeting between WHO and South African officials, and the evolution of the B.1.1.529 variant. This will dictate market reaction for next week.
Nembe Oil Spill: FG Halts Aiteo From Operating Oilfield in Bayelsa
Following the damages done by AITEO leaking oil pipe to the people of Nembe community in Bayelsa state, the Federal Government has halted all operations in the affected area until a proper investigation had been conducted.
The Ministry of Environment disclosed this in a statement signed by Mr. Saghir el Mohammed, Press Director, Ministry of Environment, on Tuesday in Abuja.
Mohammed stated that the federal government had taken a proactive measure to assess the damages done by Aiteo oil spillage to the people of Nembe Local Government Area of Bayelsa State and ensure safety of lives and properties.
The statement reads, “The Federal Government has directed the exploration company, AITEO Eastern Exploration and Production Company Limited (AEEPCo), to halt operations in the area until a proper investigation is carried out.
“Also, adequate measures will as well put in place to ensure the safety of lives and property in the area.
“It can be recalled that the spill occurred on Nov. 5, 2021, in a form of a fountain within the proximity of Opu Nembe Community at Well 1, Well Head located at the Southern Field of Sant Barbara.
“Upon receipt of the report of the incident, a Joint Investigation Team (JIT) comprising the National Oil Spill Detection and Response Agency (NOSDRA), Nigerian Upstream Petroleum Regulatory Commission (NUPRC), was set up.
“Also, the state Ministry of Environment, Community representatives and Aiteo Eastern Exploration and Production Company was set up on Nov. 6, 2021 to immediately address the situation.
“The exercise was inclusive because of inaccessibility to the wellhead location due to the hydrocarbon fumes that saturated the atmosphere in the area.
“Consequently, the JIT directed AEEPCo to shut down in the impacted asset (well head) for appropriate oil spilI response.
Accordingly, AEEPCo deployed booms and skimmers to contain the spill crude oil from spreading.
“As at Nov. 10, 2021, efforts to shut the well has proven difficult due to inaccessibility.
“Meanwhile, in an effort to safeguard the environment and livelihood, staff from the NOSDRA’s Yenagoa Field Office were deployed to the site to monitor and give a progress reports on the measures being taken to address the issue.
“There is further directives to AEEPCo to engage all relevant stakeholders in the spilled oil recovery process.
“In this vein, 3,000 barrels of emulsified crude oil have been recovered and held in a recovery barge.
“Also, additional booms were deployed by the Clean Nigeria Association (CNA) System to work with the on-site recovery contractor.
“Further effort yielded result as containment and recovery within the leak area have been reinforced by Nov. 15,” he said.
Mohammed said that the CNA has mobilised to site for enhanced containment and recovery.
He added that boot and coots, mobilised for well control and securing and AEEPCo has secured temporary work permit for expatriates expected in the country for the activity.
According to him, based on JIT reports, a well control company (Kenyon International) was at the incident location for an on-site assessment.
“Meanwhile, containment and recovery are still on-going. It is instructive to note that the wellhead experts have arrived Nigeria and will commence work on killing the well.
“However, in order to ensure safety and guarantee future operations in the area by AEEPCo, NOSDRA has mandated the company to carry out concrete actions.
“The action is to address the situation that includes clean-up of impacted areas, remediation of spill site as well as damage assessment and post-spill impact assessment.
“NOSDRA, through the Federal Ministry of Environment, will keep the public informed on future developments on the spill incident with an effort to contain further spread and limit the effect on the environment.
Cryptocurrency3 weeks ago
Cryptocurrency Ban: Banks Close Accounts Link to Cryptocurrency Traders in Nigeria
Cryptocurrency2 weeks ago
Shiba Inu Update: Bricks Buster and AMC To Support SHIB Army
Banking Sector4 weeks ago
Stanbic IBTC Continues to Struggle, Profit Drops 40 Percent
Banking Sector4 weeks ago
First Bank Unveils Fully Automated Branch
Fintech4 weeks ago
Flutterwave Partners Standard Bank to Drive Digital Transformation In Africa
Cryptocurrency3 weeks ago
Shiba Inu Sheds 14.55 Percent in 24 Hours as Whale Moves $2.3 Billion Worth of Shiba
Company News4 weeks ago
Dangote Cement Still the King, Generates Over N1 Trillion Revenue in Three Quarters
Finance3 weeks ago
Tony Elumelu Launches Gen-U Sahel Alongside Daughter, Oge Elumelu