Connect with us

Crude Oil

Oil Gains Marginally on Possible Demand Recovery in China

Published

on

Crude Oil - Investors King

Oil prices inched slightly higher on Wednesday as optimism for a demand recovery in China and expectations that major producers will maintain current output policy offset global recession worries.

Brent crude oil, against which Nigerian oil is priced, appreciated by 17 cents, or 0.2%, to $86.30 per barrel after falling by 2.3% on Tuesday. U.S. West Texas Intermediate (WTI) crude climbed 7 cents, or 0.1%, to $80.20, after a 1.8% drop on Tuesday.

“Expectations that China’s fuel demand will recover in the second half of the year are growing and are likely to support market sentiment,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

Analysts from the Bank of America Securities said the reopening of the Chinese economy after years of tough COVID restrictions could unleash a large wave of pent-up demand over the next 18 months.

On the supply side, volumes should remain steady for the medium term as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, is expected to keep its output policy unchanged.

An OPEC+ panel is likely to endorse the producer group’s current oil output policy when it meets next week, five OPEC+ sources said on Tuesday, as hopes for higher Chinese demand are balanced by worries over inflation and the global economy.

OPEC+ in October decided to trim output by 2 million barrels per day from November through 2023 on a weaker economic outlook.

However, gains in oil prices were capped by a bigger-than-expected build in U.S. oil inventories that was reported after the market settled on Tuesday.

U.S. crude stocks rose by about 3.4 million barrels in the week ended Jan. 20, according to market sources citing American Petroleum Institute figures. That was triple the forecast for an about 1 million build in a preliminary Reuters poll on Monday.

Nissan’s Kikukawa, however, expects the build “to be temporary as the supply disruptions from a cold snap in the United States a few weeks ago would only impact data in the next couple of weeks”.

Official data from the U.S. Energy Information Administration will be released later on Wednesday.

Kikukawa expects WTI to trade in a range between $75 and $85 a barrel in the coming weeks.

Markets are also watching out for interest rate decisions from central banks for more trading cues.

“It seems that the absence of hawkish Fed comments from the current blackout period has removed a key overhang for risk sentiments for now, providing some renewed traction back into growth,” Yeap Jun Rong, market analyst at IG, said in a note.

Investors are waiting to see if the U.S. Federal Reserve will “react to recent downside surprise in inflation and growth” when it meets next week, the analyst added.

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.

Continue Reading
Comments

Crude Oil

Oil Markets Hold Breath as Iran-Israel Tensions Mount

Published

on

Crude Oil - Investors King

Amidst escalating tensions between Iran and Israel, the global oil markets find itself in a precarious position, with traders and investors anxiously watching for potential ramifications on prices and supply dynamics.

The latest developments have cast a shadow of uncertainty over the already volatile energy sector, prompting a flurry of activity and speculation among industry players.

Last week marked a downturn for oil as Brent crude experienced its first back-to-back weekly decline of the year, slipping below $87 a barrel. This decline, coupled with the largest drop since early February, reflects the unease permeating through the market as geopolitical tensions in the Middle East reach a fever pitch.

The catalyst for this downturn stems from a series of events that unfolded in the region.

Iran’s unprecedented drone and missile strike on Israel sent shockwaves through the international community, triggering a swift response from Israeli authorities.

However, conflicting reports emerged regarding the severity of Israel’s retaliation, leaving traders grappling with uncertainty over the potential escalation of hostilities.

In response to the heightened tensions, the US House of Representatives passed new sanctions targeting Iran’s oil sector, signaling a firm stance against the Islamic Republic’s aggressive actions.

With the measure now poised for Senate approval, the specter of further economic pressure on Iran looms large, raising concerns about potential disruptions to global oil supplies.

Warren Patterson, head of commodities strategy for ING Groep NV, who commented on the surprising resilience of oil prices in the face of heightened risk and tension in the Middle East, noted that while the market remains vigilant, it appears unfazed by the current geopolitical climate, choosing instead to adopt a wait-and-see approach regarding the impact of US sanctions on Iranian oil flows.

Despite the prevailing sense of uncertainty, there are signs of bullish sentiment among money managers, who are increasingly positioning themselves to capitalize on any potential spikes in oil prices.

Oil call options, which profit from price increases, are trading at a premium over puts, indicating a belief among investors that the market could tilt in favor of higher prices amidst geopolitical turmoil.

Looking ahead, the focus shifts to a flurry of upcoming events that could further shape the trajectory of oil markets.

Investors eagerly await a slew of economic data from the United States, including key indicators such as the Federal Reserve’s preferred measure of inflation, which will provide valuable insights into the future path of monetary policy.

Additionally, earnings reports from major oil companies, including TotalEnergies SE, Chevron Corp., and Exxon Mobil Corp., are set to be released this week.

These reports will offer a glimpse into the financial health of the industry giants and shed light on their production growth strategies amid a backdrop of geopolitical instability.

As tensions continue to simmer in the Middle East, the oil markets remain on edge, with every development closely scrutinized for its potential impact on prices and global energy security.

In this climate of uncertainty, traders and investors alike brace themselves for the next twist in this geopolitical saga, mindful of the far-reaching implications for the world’s most vital commodity.

Continue Reading

Crude Oil

Dangote Refinery Leverages Cheaper US Oil Imports to Boost Production

Published

on

Crude Oil

The Dangote Petroleum Refinery is capitalizing on the availability of cheaper oil imports from the United States.

Recent reports indicate that the refinery with a capacity of 650,000 barrels per day has begun leveraging US-grade oil to power its operations in Nigeria.

According to insights from industry analysts, the refinery has commenced shipping various products, including jet fuel, gasoil, and naphtha, as it gradually ramps up its production capacity.

The utilization of US oil imports, particularly the WTI Midland grade, has provided Dangote Refinery with a cost-effective solution for its feedstock requirements.

Experts anticipate that the refinery’s gasoline-focused units, expected to come online in the summer months will further bolster its influence in the Atlantic Basin gasoline markets.

Alan Gelder, Vice President of Refining, Chemicals, and Oil Markets at Wood Mackenzie, noted that Dangote’s entry into the gasoline market is poised to reshape the West African gasoline supply dynamics.

Despite operating at approximately half its nameplate capacity, Dangote Refinery’s impact on regional fuel markets is already being felt. The refinery’s recent announcement of a reduction in diesel prices from N1,200/litre to N1,000/litre has generated excitement within Nigeria’s downstream oil sector.

This move is expected to positively affect various sectors of the economy and contribute to reducing the country’s high inflation rate.

Furthermore, the refinery’s utilization of US oil imports shows its commitment to exploring cost-effective solutions while striving to meet Nigeria’s domestic fuel demand. As the refinery continues to optimize its production processes, it is poised to play a pivotal role in Nigeria’s energy landscape and contribute to the country’s quest for self-sufficiency in refined petroleum products.

Moreover, the Nigerian government’s recent directive to compel oil producers to prioritize domestic refineries for crude supply aligns with Dangote Refinery’s objectives of reducing reliance on imported refined products.

With the flexibility to purchase crude using either the local currency or the US dollar, the refinery is well-positioned to capitalize on these policy reforms and further enhance its operational efficiency.

Continue Reading

Crude Oil

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

Published

on

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.

Continue Reading
Advertisement




Advertisement
Advertisement
Advertisement

Trending