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Oil Prices Fall as Demand Drops on Rising China Covid-19 Cases



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Global oil prices declined on Thursday as cases of Covid-10 grew in China, the world’s largest importer of the commodity.

Brent crude oil, against which Nigerian oil is priced, declined by 79 cents, or 1.0%, to $82.47 a barrel while U.S. crude dropped by 80 cents, or 1.0%, to $78.16 a barrel.

The scale of the latest outbreak and doubts over official data prompted some countries to enact new travel rules on Chinese visitors, even as China began dismantling the world’s strictest COVID regime of lockdowns and testing.

“The lack of clarity over the virus situation in China has prompted some new travel rules from various countries, which could serve as some dampener for previous optimism,” said Jun Rong Yeap, market strategist at IG.

“Heading into 2023, there are chances for oil prices to rebound but it will still boil down to the pace of China’s reopening, and whether market participants have priced for the growth risks as a trade-off to tighter central bank policies,” he added.

Oil markets were also buffeted by expectations of another U.S. interest rate increase in the United States, as the Federal Reserve tries to limit price rises in a tight labour market.

U.S. crude oil inventories fell less than expected, by about 1.3 million barrels, in the week ended Dec. 23, according to market sources citing American Petroleum Institute figures.

That compared with estimates for a draw of 1.5 million barrels, according to analysts’ estimates.

Also weighing on prices, pipeline operator TC Energy said it was working to restart the portion of the Keystone pipeline that was shut down after a leak this month. However, that comes as an Arctic freeze has forced some oil refining facilities offline, backing up crude supplies.

Oil refiners continued to ramp up operations, but some of the recovery is expected to extend to January.

Markets, however, drew some support from Russian President Vladimir Putin’s ban on exports of crude oil and oil products from Feb. 1 for five months to nations that abide by a Western price cap.

Germany said the ban has “no practical significance” as the country has been working since spring to replace Russian oil supplies and ensure security of supply.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq,, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Oil Prices Decline for Third Consecutive Day on Weaker Economic Data and Inventory Concerns



Crude Oil

Oil prices extended their decline for the third consecutive day on Wednesday as concerns over weaker economic data and increasing commercial inventories in the United States weighed on oil outlook.

Brent oil, against which Nigerian oil is priced, dropped by 51 cents to $89.51 per barrel, while U.S. West Texas Intermediate crude oil fell by 41 cents to $84.95 a barrel.

The softening of oil prices this week reflects the impact of economic headwinds on global demand, dampening the gains typically seen from geopolitical tensions.

Market observers are closely monitoring how Israel might respond to Iran’s recent attack, though analysts suggest that this event may not significantly affect Iran’s oil exports.

John Evans, an oil broker at PVM, remarked on the situation, noting that oil prices are readjusting after factoring in a “war premium” and facing setbacks in hopes for interest rate cuts.

The anticipation for interest rate cuts received a blow as top U.S. Federal Reserve officials, including Chair Jerome Powell, refrained from providing guidance on the timing of such cuts. This dashed investors’ expectations for significant reductions in borrowing costs this year.

Similarly, Britain’s slower-than-expected inflation rate in March hinted at a delay in the Bank of England’s rate cut, while inflation across the euro zone suggested a potential rate cut by the European Central Bank in June.

Meanwhile, concerns about U.S. crude inventories persist, with a Reuters poll indicating a rise of about 1.4 million barrels last week. Official data from the Energy Information Administration is awaited, scheduled for release on Wednesday.

Adding to the mix, Tengizchevroil announced plans for maintenance at one of six production trains at the Tengiz oilfield in Kazakhstan in May, further influencing market sentiment.

As the oil market navigates through a landscape of economic indicators and geopolitical events, investors remain vigilant for cues that could dictate future price movements.

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IEA Cuts 2024 Oil Demand Growth Forecast by 100,000 Barrels per Day



Crude Oil

The International Energy Agency (IEA) has reduced its forecast for global oil demand growth in 2024 by 100,000 barrels per day (bpd).

The agency cited a sluggish start to the year in developed economies as a key factor contributing to the downward revision.

According to the latest Oil Market Report released by the IEA, global oil consumption has continued to experience a slowdown in growth momentum with first-quarter growth estimated at 1.6 million bpd.

This figure falls short of the IEA’s previous forecast by 120,000 bpd, indicating a more sluggish demand recovery than anticipated.

With much of the post-Covid rebound already realized, the IEA now projects global oil demand to grow by 1.2 million bpd in 2024.

Furthermore, growth is expected to decelerate further to 1.1 million bpd in the following year, reflecting ongoing challenges in the market.

This revision comes just a month after the IEA had raised its outlook for 2024 oil demand growth by 110,000 bpd from its February report.

At that time, the agency had expected demand growth to reach 1.3 million bpd for 2024, indicating a more optimistic outlook compared to the current revision.

The IEA’s latest demand growth estimates diverge significantly from those of the Organization of the Petroleum Exporting Countries (OPEC). While the IEA projects modest growth, OPEC maintains its forecast of robust global oil demand growth of 2.2 million bpd for 2024, consistent with its previous assessment.

However, uncertainties loom over the global oil market, particularly due to geopolitical tensions and supply disruptions.

The IEA has highlighted the impact of drone attacks from Ukraine on Russian refineries, which could potentially disrupt fuel markets globally.

Up to 600,000 bpd of Russia’s refinery capacity could be offline in the second quarter due to these attacks, according to the IEA’s assessment.

Furthermore, unplanned outages in Europe and tepid Chinese activity have contributed to a lowered forecast of global refinery throughputs for 2024.

The IEA now anticipates refinery throughputs to rise by 1 million bpd to 83.3 million bpd, reflecting the challenges facing the refining sector.

The situation has raised concerns among policymakers, with the United States expressing worries over the impact of Ukrainian drone strikes on Russian oil refineries.

There are fears that these attacks could lead to retaliatory measures from Russia and result in higher international oil prices.

As the global oil market navigates through these challenges, stakeholders will closely monitor developments and adjust their strategies accordingly to adapt to the evolving landscape.

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Federal Government Allows Indigenous Refineries to Purchase Crude Oil in Naira or Dollars



Dangote Refinery

The Federal Government of Nigeria has announced that domestic crude oil refiners and other operators in the sector are now permitted to buy crude oil in either naira or dollars.

This move comes as a response to longstanding demands from stakeholders in the industry and is poised to reshape the dynamics of the nation’s oil market.

The announcement was made on Monday through the Nigerian Upstream Petroleum Regulatory Commission during a briefing in Abuja.

According to the commission, the decision to allow the purchase of crude oil in naira or dollars aligns with the provisions of Section 109(2) of the Petroleum Industry Act 2021.

The development of the new template involved collaboration with key stakeholders, including representatives from NNPC Upstream Investment Management Services, Crude Oil/Condensate Producers, Crude Oil Refinery-Owners Association of Nigeria, and Dangote Petroleum Refinery.

Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission, Gbenga Komolafe, said the new template will ensure a seamless implementation of the Domestic Crude Oil Supply Obligation (DCSO) and maintain a consistent supply of crude oil to domestic refineries.

He highlighted that the flexibility to transact in either naira or dollars would alleviate pressure on the country’s foreign exchange rate, potentially benefiting the overall economy.

Responding to inquiries regarding the currency of transaction, Komolafe reiterated that payments could be made in either United States dollars or naira, or a combination of both, as agreed upon in the Sales and Purchase Agreement (SPA) between the producer and the refiner.

This flexibility is expected to ease the financial burden on indigenous refineries and support their sustainability in the face of economic challenges.

The decision comes after modular refineries in Nigeria faced threats of shutdown due to difficulties in accessing foreign exchange for crude oil purchases.

These refineries with a combined capacity of producing 200,000 barrels of crude oil daily, struggled to secure dollars for purchasing crude, which is priced in US dollars.

The Crude Oil Refinery Owners Association of Nigeria had previously expressed concerns over the impact of the foreign exchange crisis on their operations.

Furthermore, alongside the announcement regarding crude oil purchases, the government revealed an increase in the country’s crude oil and condensate reserves to 37.5 billion barrels as of January 1, 2024.

Gas reserves also saw an uptick, reaching 209.26 trillion cubic feet during the same period, signifying substantial potential for future exploration and production activities.

As Nigeria navigates its oil and gas landscape, the decision to allow indigenous refineries to purchase crude oil in naira or dollars marks a significant step towards supporting local industry players and promoting economic stability in the sector.

With the potential to enhance operational efficiency and mitigate financial challenges, this policy shift holds promise for the growth and sustainability of Nigeria’s oil refining sector.

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