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Oil Prices Stabilize as OPEC+ Weighs Deeper Output Cuts Amid Global Supply Concerns

Market Evaluates OPEC+ Decision Amidst Bearish Sentiment and Global Supply Worries

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Crude Oil - Investors King

Oil prices steadied after a recent downward trend as the market assessed the possibility of OPEC+ implementing deeper output cuts to balance the scales against signs of a global supply surplus.

Brent crude hovered below $80 a barrel following a four-day decline, while West Texas Intermediate dipped below $75.

OPEC+’s leader, Saudi Arabia, has urged other member nations to reduce their production quotas to bolster markets, though resistance from some members complicates the decision.

Vishnu Varathan, Asia head of economics and strategy at Mizuho Bank Ltd, cautioned oil bears against underestimating Saudi Arabia’s determination, although achieving unanimous support from member states could prove challenging.

The oil market has witnessed a roughly 20% decline since late September due to ample supplies and concerns about the global economic landscape.

This has spurred expectations for the 23-nation alliance to take corrective action at its upcoming online meeting.

A Bloomberg survey revealed that approximately half of respondents anticipate OPEC+ implementing additional measures to tighten the market.

Failure to announce an extra cut of around 1 million barrels per day on top of Saudi Arabia’s existing curbs might result in prices sinking to the low $70s per barrel, according to analysts at Eurasia Group led by Raad Alkadiri.

Reflecting this bearish sentiment, hedge funds have significantly reduced their combined net-long positions in Brent and WTI to the lowest levels since late June.

The International Energy Agency’s warning earlier this month of an impending surplus in markets next year due to a significant deceleration in demand growth has added urgency to OPEC+’s deliberations.

Meanwhile, disruptions caused by a storm in the Black Sea have halted commodity loadings, including crude, from key ports in Russia and Ukraine.

The storm is expected to persist throughout the week, according to Russia’s oil-pipeline operator Transneft PJSC.

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Crude Oil

Oil Prices Slide as U.S. Crude Stockpiles Surge, Heightening Demand Concerns

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Oil prices declined on Thursday as concerns over demand intensified due to a larger-than-anticipated build in U.S. crude stockpiles.

Brent crude oil, against which Nigerian oil is priced, dropped by 0.5% to $83.25 a barrel while U.S. West Texas Intermediate crude oil fell by 0.3% to $78.28 a barrel.

The Energy Information Administration’s report revealed a substantial increase in U.S. crude oil stockpiles by 4.2 million barrels to 447.2 million barrels for the week ending February 23rd.

This surge surpassed analysts’ expectations and marked the fifth consecutive week of rising inventories.

While gasoline and distillate inventories witnessed a decline, concerns regarding a sluggish economy and reduced oil demand in the U.S. were amplified.

Satoru Yoshida, a commodity analyst with Rakuten Securities, highlighted that the significant stockpiles have heightened investor worries.

Moreover, the anticipation of delayed U.S. interest rate cuts further weighed on market sentiment, potentially undermining oil demand.

Traders have adjusted their expectations for rate cuts, with an easing cycle predicted to commence in June rather than March as previously anticipated.

Market participants await the U.S. personal consumption expenditures price index for insights into inflation trends, while the possibility of an extension of voluntary oil output cuts from OPEC+ looms over price dynamics, amid lingering uncertainty in the demand outlook and geopolitical tensions in the Middle East.

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Crude Oil Shortage Threatens Dangote, Government Refineries, Minister Raises Alarm

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Dangote Refinery

The Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, has sounded a clarion call over a looming crude oil shortage that threatens the operations of the newly inaugurated Dangote Petrochemical Refinery and government-owned refineries in Nigeria.

Addressing stakeholders at the seventh edition of the Nigeria International Energy Summit in Abuja, Minister Lokpobiri expressed concerns that unless deliberate efforts are made to increase investments and crude oil production, these refineries may struggle to obtain enough feedstock for petroleum product manufacturing.

The Dangote refinery, a colossal project spearheaded by Dangote Industries Limited, has a daily requirement of up to 650,000 barrels of crude oil, while government-owned refineries could need approximately 400,000 barrels.

However, the current pace of crude oil production and investment in Nigeria falls short of meeting these demands.

Minister Lokpobiri highlighted the need to ramp up production and attract investments in the upstream sector to ensure adequate feedstock supply for the refineries.

He emphasized the importance of efficiently utilizing Nigeria’s abundant oil and gas reserves to enhance domestic energy security and economic prosperity.

Furthermore, the minister underscored the significance of investing in energy infrastructure and transitioning towards more environmentally friendly practices to address Nigeria’s energy needs effectively.

The alarm raised by Minister Lokpobiri underscores the urgency for strategic interventions and collaborative efforts to mitigate the impending crude oil shortage and secure the future of Nigeria’s refining industry amidst evolving global energy dynamics.

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Oil Prices Surge as Brent Approaches $83, WTI Nears $78 Amidst Refinery Buying Activity

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Oil prices surged as Brent crude oil approached the $83 price level while West Texas Intermediate (WTI) neared $78 as refineries in the United States and China increased purchases.

Brent crude oil, against which Nigerian oil is priced, gained 1.1% on Monday, signaling a bullish trend in the oil market.

The recent uptick in oil prices comes amidst signs of heightened demand from refineries, particularly in key markets like the US and China.

This surge in demand has contributed to the strengthening of timespreads, indicating tighter conditions in the near term.

Market observers are closely monitoring the International Energy Week in London, where industry leaders are convening to discuss the outlook for the global energy market.

Scheduled speakers include Russell Hardy, the CEO of Vitol Group, a major player in the energy sector.

While tensions in the Middle East and production cuts by the OPEC+ alliance have supported crude prices, increased production from non-OPEC+ countries, notably the US, has capped potential gains.

Analysts predict that oil prices may continue to trade within a range, with Brent crude expected to hover around $83, while WTI remains near the $78 mark, barring significant shifts in market dynamics.

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