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Crude Oil

Oil Prices Inch Up 1% Amidst Middle East Security Concerns and U.S. Crude Withdrawal



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Oil prices saw a modest uptick of about 1% on Wednesday, driven by a confluence of factors ranging from geopolitical tensions in the Middle East to unexpected withdrawals from U.S. crude storage.

Brent oil, the international benchmark for Nigerian crude oil, rose by $1.02 to settle at $74.26 a barrel while U.S. West Texas Intermediate (WTI) crude experienced an increase of 1.3%, reaching $69.47.

The backdrop of heightened concerns about the security of Middle East oil supplies played a significant role in bolstering oil prices.

A recent attack on a tanker in the Red Sea off Yemen’s coast, where gunmen in a speedboat targeted the vessel with missiles, added to the apprehension surrounding the vital shipping lane.

Yemeni Houthi forces had previously issued warnings, urging ships to avoid travel to Israel.

Another contributing factor to the oil price rally was the larger-than-expected weekly withdrawal of 4.3 million barrels from U.S. crude stockpiles, as reported by the U.S. Energy Information Administration (EIA).

This unexpected drawdown, coupled with a decline in imports, served as a catalyst for the positive market sentiment.

The U.S. Federal Reserve’s decision to maintain interest rates, as anticipated, and its indication of potential rate reductions in 2024 also influenced the oil market.

Lower interest rates typically lead to reduced borrowing costs, stimulating economic growth and consequently boosting demand for oil.

Despite a recent dip that saw both Brent and WTI futures reaching their lowest levels since June and exhibiting a contango structure, the recent developments have sparked optimism among traders.

The situation is being closely monitored as the oil market navigates a delicate balance between geopolitical tensions, global economic indicators, and the ongoing efforts of major oil-producing nations.

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Nigeria’s Crude Oil Production Falls for Second Consecutive Month, OPEC Reports



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Nigeria’s crude oil production declined for the second consecutive month in March, according to the latest report from the Organization of Petroleum Exporting Countries (OPEC).

Data obtained from OPEC’s Monthly Oil Market Report for April 2024 reveals that Nigeria’s crude oil production depreciated from 1.322 million barrels per day (mbpd) in February to 1.231 mbpd in March.

This decline underscores the challenges faced by Africa’s largest oil-producing nation in maintaining consistent output levels.

Despite efforts to stabilize production, Nigeria has struggled to curb the impact of oil theft and pipeline vandalism, which continue to plague the industry.

The theft and sabotage of oil infrastructure have resulted in significant disruptions, contributing to the decline in crude oil production observed in recent months.

The Nigerian National Petroleum Company Limited (NNPCL) recently disclosed alarming statistics regarding oil theft incidents in the country.

According to reports, the NNPCL recorded 155 oil theft incidents within a single week, these incidents included illegal pipeline connections, refinery operations, vessel infractions, and oil spills, among others.

The persistent menace of oil theft poses a considerable threat to Nigeria’s economy and its position as a key player in the global oil market.

The illicit activities not only lead to revenue losses for the government but also disrupt the operations of oil companies and undermine investor confidence in the sector.

In response to the escalating problem, the Nigerian government has intensified efforts to combat oil theft and vandalism.

However, addressing these challenges requires a multi-faceted approach, including enhanced security measures, regulatory reforms, and community engagement initiatives.

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Oil Prices Edge Higher Amidst Fear of Middle East Conflict



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Amidst growing apprehensions of a potential conflict in the Middle East, oil prices have inched higher as investors anticipate a strike from Iran.

The specter of a showdown between Iran or its proxies and Israel has sent tremors across the oil market as traders brace for possible supply disruptions in the region.

Brent crude oil climbed above the $90 price level following a 1.1% gain on Wednesday while West Texas Intermediate (WTI) hovered near $86.

The anticipation of a strike, believed to be imminent by the United States and its allies, has cast a shadow over market sentiment. Such an escalation would follow Iran’s recent threat to retaliate against Israel for an attack on a diplomatic compound in Syria.

The trajectory of oil prices this year has been heavily influenced by geopolitical tensions and supply dynamics. Geopolitical unrest, coupled with ongoing OPEC+ supply cuts, has propelled oil prices nearly 18% higher since the beginning of the year.

However, this upward momentum is tempered by concerns such as swelling US crude stockpiles, now at their highest since July, and the impact of a hot US inflation print on Federal Reserve rate-cut expectations.

Despite the bullish sentiment prevailing among many of the world’s top traders and Wall Street banks, with some envisioning a return to $100 for the global benchmark, caution lingers.

Macquarie Group has cautioned that Brent could enter a bear market in the second half of the year if geopolitical events fail to materialize into actual supply disruptions.

“The current geopolitical environment continues to provide support to oil prices,” remarked Warren Patterson, head of commodities strategy for ING Groep NV in Singapore. However, he added, “further upside is limited without a fresh catalyst or further escalation in the Middle East.”

The rhetoric from Iran’s Supreme Leader, Ayatollah Ali Khamenei, reaffirming a vow to retaliate against Israel, has only heightened tensions in the region.

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Oil Marketers Call for Price Cut as Dangote Refinery Faces Scrutiny



Oil marketers in Nigeria are intensifying pressure on the Dangote Petroleum Refinery to slash the pump price of diesel amidst increasing scrutiny over the refinery’s pricing strategies.

The call for a reduction in prices comes as the indigenous refinery continues to grapple with challenges in the local market, despite its ambitious plans to revolutionize Nigeria’s petroleum sector.

The Independent Petroleum Marketers Association of Nigeria (IPMAN) and the Petroleum Products Retail Outlets Owners Association of Nigeria have both joined the chorus of voices demanding a downward review of diesel prices produced by the Dangote refinery.

The current price of N1,225 per litre has drawn criticism from industry stakeholders, who argue that it is unreasonably high for a locally produced commodity.

Speaking to media, Chief Chinedu Ukadike, the National Public Relations Officer of IPMAN, commended the refinery for its efforts but stressed the need for more affordable pricing.

“During the construction of the Dangote refinery, we supported and welcomed it. Now that a private refinery with high capacity has started producing petroleum products in Nigeria, we would have appreciated that its products sold to Nigerians would be cheaper,” Ukadike stated.

One of the primary reasons cited for the demand for lower prices is the absence of import-related costs associated with diesel produced domestically. Unlike imported diesel, which incurs expenses such as vessel costs and import charges, diesel from the Dangote refinery should theoretically be cheaper due to reduced logistical overheads.

Oil marketers also argue that the recent appreciation of the naira against the dollar should translate into lower prices for domestically produced diesel. With imported diesel currently landing in Nigeria at N1,250 per litre, the disparity in pricing raises questions about the competitiveness of locally refined products.

The issue has prompted IPMAN and other industry groups to schedule meetings with the management of the Dangote refinery to discuss pricing concerns. The expectation is that these discussions will lead to a fairer pricing structure that benefits both consumers and industry players.

Despite the pressure from oil marketers, the Dangote refinery has remained tight-lipped on the matter, declining to comment on the calls for price reduction.

However, sources within the refinery have confirmed that diesel sales have commenced, with plans to introduce Premium Motor Spirit (petrol) to the market in the near future.

The Dangote Petroleum Refinery, with a nameplate capacity of 650,000 barrels per day, holds significant potential to transform Nigeria’s energy landscape.

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