Despite the strong U.S. dollar and slowing demand for crude oil, the price of the commodity pulled back on Monday during the New York trading session.
Brent crude oil, against which Nigerian oil is priced, pulled back from $88 a barrel to $91.52 at 5:31 pm Nigerian time. While the U.S. West Texas Intermediate oil pared losses to $84.75 a barrel, up from $81.65 it traded in the early hours of the day.
The price of the commodity traded lower in the early hours of the day on concerns that central banks will raise interest rates to curb inflationary pressures, a move expected to further hurt demand for crude oil and support the U.S. Dollar’s attractiveness to foreign investors.
“Ideas that continued rate increases will slow world crude demand and keep upward pressure on the U.S. Dollar is triggering long liquidation in both crude and natural gas this morning,” said Dennis Kissler, senior vice president of trading at BOK Financial.
While the pullback may not last given a series of factors impacting the outlook of the commodity, supply remained tight and will continue to dictate prices for the remaining part of the year, especially with the Organization of Petroleum Exporting Countries and allies led by Russia, known as OPEC+ still struggling to up production.
The cartel fell short in August, missing its target by 3.583 million barrels per day (mbpd) following a 2.892 mbpd missed in July.
“The market still has the start of European sanctions on Russian oil hanging over it. As supply is disrupted in early December, the market is unlikely to see any quick response from U.S. producers,” ANZ analysts said.
However, the gradual easing of COVID-19 restrictions in China, the largest importer of the commodity, may help bolster prices.
Nigeria Risks Losing N1.37 Trillion as PENGASSAN Threatens to Embark on Strike
Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) threatens to embark on a nationwide strike amid rising crude oil theft.
The federal government could lose as much as N1.37 trillion worth of crude oil production as the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) threatens to embark on a nationwide strike amid rising crude oil theft.
PENGASSAN said the industrial action would last for 30 days, except the government addressed the nation’s incessant crude oil theft.
The association zonal chairman, Prince Audu Osihiokhamele, who was present at a sensitization rally held in Warri, Delta State disclosed on Friday.
According to him “the big men doing the business of crude oil theft are in government.
“They say they load vessels, but we don’t see any. Is it a needle?”
Audu further stated that should the authorities fail to take the necessary actions to arrest the crisis, PENGASSAN would be forced to take drastic action.
He said “We will shut down the country for 30 days until we all come to the round table to unravel the mysteries surrounding the thefts.
“PENGASSAN will resort to shutting down production for 30 days by withdrawing members, both onshore and offshore, wherever they are producing crude, should the government fail to hearken to this warning.”
In July 2022, Nigeria’s crude oil production dropped to an all-time low of 972,394 barrels per day, according to a report released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and obtained by Investors King.
Prior to theft and a series of attacks in the Southern part of the country, Nigeria’s crude oil production stood at about 2.1 million barrels per day. However, despite oil trading at a relatively high price in recent months following Russia’s invasion of Ukraine on February 24, 2022, production in Africa’s largest economy has nosedived and continues to trend downward.
This, experts have attributed to an unusually high level of oil theft in key crude oil producing states. Some stakeholders have gone as far as accusing politicians and other government officials of being part-takers or even encouraging it.
Recently, in an effort to curb theft and prop up Nigerian crude oil production, the Federal Government was forced to engage the service of a rebel leader, popularly known as Tompolo.
Tompolo, who was once declared wanted and a criminal, was awarded N48 billion, or $112.123 million in yearly survelliance contract to provide security for government oil assets and investments in the Southern part of the nation.
While this agreement might work in the near term, it could spell doom for the nation in the future like the Boko haram in the North and IPOB in the East.
Nigeria’s Oil Production Dropped By More Than 10 Percent In August
Nigeria’s oil production dropped by more than 10 percent below the one million mark in August
Nigeria’s oil production has been on the decline in the past months. Last month, oil production dropped by more than 10 percent below the one million mark.
Findings by Investors King show that Nigeria’s oil production in August hit an all-time low of 972,394 barrels per day.
According to the report by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the drop is more than 10 percent when compared to 1.08 million a day produced in July 2022.
July production of 1.08 million bpd is nonetheless lower than the country’s quota which was set at 1.8 million bpd by the Organisation of Petroleum Exporting Countries (OPEC).
The shortfall in Nigeria’s oil production can be significantly attributed to oil theft and pipeline vandalism which started in 2021 and entered a large magnitude this year.
Investors King had earlier reported that Nigeria lost $3.5 billion dollars to oil theft in 2021.
Meanwhile, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has threatened to shut down oil production in Nigeria for 30 days if the Federal Government fails to curb the lingering massive oil theft in Niger Delta.
Members of the union staged protests in various parts of Nigeria including Abuja, Warri in Delta State, Kaduna and Port Harcourt in Rivers State.
Speaking at the sensitisation rally that was held at the Delta State Governor’s Office Annexe in Warri, the PENGASSAN Zonal Chairman, Prince Audu Osihiokhamele, noted with concern that “the big men doing the business of crude oil theft are in government.”
“We will shut down the country for 30 days until we all come to the round table to unravel the mysteries surrounding the thefts,” Osihiokhamele stated.
Findings show that if PENGASSAN shut down oil operations for 30 days, Nigeria might lose about N1.37 trillion.
Trouble For Nigeria As Oil Price Falls Below $90 Per Barrel
Global oil prices dropped below $90 a barrel on Wednesday as global economic uncertainty continues to weigh on the demand for the commodity
Global oil prices dropped below $90 a barrel on Wednesday as global economic uncertainty continues to weigh on the demand for the commodity.
Brent crude oil, against which Nigerian oil is priced, declined by $4.83 to $88 a barrel, falling below $90 a barrel for the first since Feb. 8, 2022. While, the U.S. West Texas Intermediate crude oil shed $4.94, or 5.7%, to $81.94 per barrel, its lowest since January 2022
Crude oil had traded at a high of $124.76 on the 7th of March, 2022.
This recent fall could be credited to the growing fear of economic recession and another potential interest rate increment by the Federal Reserve which has strengthened the value of the American dollar.
Analysts believe that the slowing demand for the commodity in Europe, the cut in production by the Organisation of the Petroleum Exporting Countries (OPEC), coupled with interest rate hikes by central banks are some of the major factors influencing the fall in oil prices.
It is believed that a stronger dollar will reduce demand for the commodity as it would be expensive for holders of foreign currencies given crude oil is sold in the U.S. Dollar.
After Russian President Vladimir Putin invaded Ukraine, Europe has since aggressively cut reliance on Russian oil and focused on alternatives source of energy like solar, etc.
“The oil market is a bloodbath” as crude prices take a major hit from “sharply weakening” global demand, describes Edward Moya, senior market analyst at Oanda also said.
In China, crude oil imports also dropped by 9.4% in August compared to the same month in 2021.
It is believed that Nigeria will be one of the most affected economies. The country is known to heavily finance its fiscal budget with proceeds from oil. In the 2023 budget, Nigeria had projected total revenue of N8.46 trillion out of which N1.9 trillion is expected from oil-related sources, representing almost 20 percent.
The country lost 90,000 barrels per day to theft in August, or roughly 2.8 million barrels in the month, making last month’s production of 1.43 million BPD one of the lowest in five years.
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