Crude Oil

OPEC Flags Downside Risks to Summer Oil Demand, Shedding Light on Output Cuts

Published

1 year ago

April 13, 2023

The Organization of the Petroleum Exporting Countries (OPEC) has recently flagged downside risks to summer oil demand as a backdrop to output cuts announced this month by OPEC+ producers.

The group highlighted some of the factors behind the surprise move that led to a rise in oil prices.

OPEC+ comprises OPEC, Russia, and other oil-producing countries, and on April 2, some of its members announced new voluntary production cuts. The unexpected move has prompted oil to rally towards $87 a barrel from below $80.

OPEC+ gave little information on the reasons for the surprise cuts, saying in a statement that they were a “precautionary measure” to support market stability. However, OPEC delegates revealed that they did not know the exact reasons for the reduction.

In a discussion on the summer market outlook in its monthly oil report on Thursday, OPEC said that oil inventories looked more ample and global growth faced a number of challenges.

OPEC referred to the Organisation for Economic Co-operation and Development (OECD) commercial inventories that have been building in recent months, and product balances that are less tight than seen at the same time last year.

OPEC also pointed out that the usual U.S. seasonal demand uptick could take a hit from any economic weakness due to interest rate hikes. Moreover, the reopening of China after strict COVID-19 containment measures were scrapped had yet to stop a decline in global refining intake of crude.

OPEC added that potential challenges to global economic development include high inflation, monetary tightening, stability of financial markets, and high sovereign, corporate, and private debt levels.

Despite the downside risks, OPEC maintained its forecast that oil demand would rise by 2.32 million barrels per day (bpd), or 2.3%, in 2023, and nudged up its forecast for China.

The global figure remained unchanged for a second straight month. OPEC left its 2023 economic growth forecast at 2.6% and cited potential downside risks. However, it said the spillover from U.S. bank failures in March had a limited economic impact.

Oil weakened after the report was released with Brent crude falling below $87 a barrel. The report also showed that OPEC’s oil production fell in March, reflecting the impact of earlier output cuts pledged by OPEC+ to support the market as well as some unplanned outages.

For November last year, with prices weakening, OPEC+ agreed to a 2 million bpd reduction in its output target, the largest since the early days of the pandemic in 2020.

The April 2 voluntary cuts bring the total curbs pledged by OPEC+ to 3.66 million bpd, equal to 3.7% of global demand.

The report kept its estimate of the amount of crude OPEC needs to pump in 2023 to balance the market steady at 29.3 million bpd, suggesting there will be a deficit if OPEC keeps pumping at March’s rate or makes further cuts.

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Samed Olukoya

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Crude Oil

Oil Prices Rebound on OPEC+ Output Delay Talks and U.S. Inventory Drop

Published

3 days ago

September 5, 2024

Samed Olukoya

Oil prices made a modest recovery on Thursday on the expectations that OPEC+ may delay planned production increases and the drop in U.S. crude inventories.

Brent crude oil, against which Nigerian oil is priced, rose by 66 cents, or 0.9% to $73.36 per barrel while U.S. West Texas Intermediate (WTI) crude appreciated by 64 cents or 0.9% to $69.84 per barrel.

The rebound in oil prices was a result of the American Petroleum Institute (API) report that revealed that the U.S. crude oil inventories had fallen by a surprising 7.431 million barrels last week, against analysts 1 million barrel decline projection.

The decline signals better than projected demand for the commodity in the United States of America and offers some relief for traders on global demand.

John Evans, an analyst at PVM Oil Associates, attributed the rebound in crude oil prices to the API report.

He said, “There is a pause of breath and light reprieve for oil prices.”

Also, discussions within the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, are fueling speculation about a potential delay in planned output increases.

The group was initially expected to increase production by 180,000 a day in October 2024.

However, concerns over softening demand in China and potential developments in Libya’s oil production have prompted the group to reconsider its strategy.

Despite the recent rebound, analysts caution that lingering uncertainties around global oil demand may continue to weigh on prices in the near term.

Crude Oil

Again NNPC Raises Petrol Price to N897/litre

Published

4 days ago

September 4, 2024

Investors King

The Nigerian National Petroleum Company (NNPC) Limited has once again increased the price of Premium Motor Spirit (PMS) from N855 per litre on Tuesday to N897 on Wednesday.

The increase was after Aliko Dangote, the Chairman of Dangote Refinery, announced the commencement of petrol production at its refinery.

The continuous increase in pump prices has raised concerns among Nigerians despite the initial excitement from the refinery announcement.

According to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the 650,000 barrels per day refinery will supply 25 million litres of petrol to the Nigerian market daily this September.

This, NMDPRA said will increase to 30 million litres per day in October.

However, the promise of increased fuel supply has not yet eased the situation on the ground.

Tunde Ayeni, a commercial bus driver at an NNPC station in Ikoyi, said “I have been in the queue since 6 a.m. waiting for them to start selling, but we just realised that the pump price has been changed to N897. This is terrible, and yet they still haven’t started selling the product.”

The price hike comes as NNPC continues to struggle with sustaining regular fuel supply.

On Sunday, the company warned that its ability to maintain steady distribution across the country was under threat due to financial strain.

NNPC cited rising supply costs as the cause of its difficulties in keeping up with demand.

Crude Oil

Brent and WTI Steady After Recent Losses as Libyan Oil Halt Continues

Published

6 days ago

September 2, 2024

Samed Olukoya

Oil prices stabilised on Monday as Libyan oil exports remained halted and following losses at the end of last week on expectations of higher OPEC+ production from October and signs of sluggish Chinese and U.S. demand.

Brent crude oil, against which Nigerian oil is priced, dipped by 6 cents, or 0.08% to close at $76.87 a barrel , while U.S. West Texas Intermediate crude edged up 8 cents, or 0.11% to $73.63.

Monday marked a public holiday in the U.S. market.

On Friday Brent and WTI lost 1.4% and 3.1%, respectively.

Oil exports at major Libyan ports were halted on Monday and production curtailed across the country, six engineers told Reuters, continuing a standoff between rival political factions over control of the central bank and oil revenue.

Libya’s Arabian Gulf Oil Company resumed output of around 120,000 barrels per day (bpd) on Sunday, to feed a power plant at the port of Hariga.

“The current disturbances in Libya’s oil production could provide room for added supply from OPEC+. But these fluctuations have become quite normal over the last few years, meaning any outages will probably be shortlived; with the news flow indicating signals for a restart of production have already been given,” said Bjarne Schieldrop, chief commodity analyst at SEB.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, is set to proceed with planned increases to oil output from October, six sources from the producer group told Reuters.

Eight OPEC+ members are scheduled to boost output by 180,000 barrels per day (bpd) in October as part of a plan to begin unwinding their most recent supply cuts of 2.2 million bpd while keeping other cuts in place until the end of 2025.

Both Brent and WTI have posted losses for two consecutive months as U.S. and Chinese demand concerns have outweighed recent disruptions in Libya and supply risk related to conflict in the Middle East.

More pessimism about Chinese demand growth surfaced after an official survey showed on Saturday that manufacturing activity sank to a six-month low in August as factory gate prices tumbled and owners struggled for orders.

“The softer-than-expected China PMI released over the weekend heightens concerns that the Chinese economy will miss growth targets,” IG market analyst Tony Sycamore said.

In the U.S., oil consumption in June dropped to seasonal lows last registered during the COVID-19 pandemic in 2020, Energy Information Administration data showed on Friday.