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Petrol Prices Surge as NNPC Faces $6 Billion Import Payment Delay

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Long queues have resurfaced at petrol stations across Nigeria, sparking renewed concerns over fuel shortages as the Nigerian National Petroleum Company (NNPC) Limited grapples with a $6 billion backlog in petrol payments.

This payment delay has significantly impacted the importation of petrol, causing a spike in fuel prices and widespread frustration among motorists.

According to industry insiders, NNPC owes approximately $6 billion to international traders, with overdue payments for January imports alone surpassing $4 billion to $5 billion.

This delay has forced suppliers to hit self-imposed debt exposure limits to Nigeria, causing a reduction in the volume of petrol supplied.

“The only reason traders are putting up with it is the $250,000 a month (per cargo) for late payment compensation,” an industry source disclosed to Reuters.

However, patience is running thin, and at least two suppliers have already pulled out of recent tenders, signaling a troubling trend.

As a result of these disruptions, Nigeria’s tenders for petrol in June and July were noticeably smaller.

NNPC plans to import around 850,000 tonnes of petrol in July, down from the usual 1 million tonnes. This reduction has had immediate consequences for Nigerian consumers.

Reports from major cities such as Lagos and Abuja indicate a resurgence of long queues at petrol stations.

In Lagos, fuel prices have skyrocketed, with some stations selling petrol for as high as N780 per litre, a significant jump from NNPC’s retail price of N580.

The scarcity has also given rise to black market activities, with sellers offering fuel at inflated prices ranging from N700 to N900 per litre.

The Group Chief Executive Officer of NNPC, Mele Kyari, acknowledged the supply issues and assured the public that efforts are underway to address the situation.

“We are working diligently to roll out more CNG mother stations across the country and ensure a stable supply of petrol,” Kyari stated.

He added that the construction of six new CNG mother stations and three LNG stations would help bring gas closer to consumers, ultimately reducing transportation costs and making fuel more accessible.

Despite these assurances, the current crisis has raised questions about the sustainability of Nigeria’s fuel subsidy system, which was scrapped in May 2023 but has effectively returned through capped pump prices.

The International Monetary Fund (IMF) has projected that the implicit subsidy will cost Nigeria an estimated N8.43 trillion of its projected N17.7 trillion in oil revenue for the year.

Motorists and business owners alike are feeling the pinch of the fuel scarcity.

Ahmad Zakari, a civil engineer in Abuja, recounted his recent ordeal: “Today, we couldn’t get petrol at any of the usual filling stations around Jabi, Utako, and Kubwa Expressway. The queues were unbearable, and prices were exorbitant.”

The NNPC has promised to resolve the supply issues promptly, but the long-term solution appears to hinge on increasing domestic refining capacity.

The completion of the 650,000 barrel-per-day Dangote refinery in Lagos and the revitalization of the NNPC-controlled refinery in Port Harcourt are seen as critical steps in reducing Nigeria’s dependency on imported petrol.

For now, Nigerians must navigate the challenges posed by the current fuel scarcity, hoping that the NNPC’s efforts will soon bear fruit and bring much-needed relief to the nation’s economy.

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.

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Oil Prices Slide on China Demand Concerns, Brent Falls to $83.73

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Oil prices declined on Tuesday for the third consecutive day on growing concerns over a slowing Chinese economy and its impact on global oil demand.

Brent crude oil, against which Nigerian oil is priced, dipped by $1.12, or 1.3% at $83.73 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped $1.15, or 1.4%, to close at $80.76.

The dip in oil prices is largely attributed to disappointing economic data from China, the world’s second-largest economy.

Official figures revealed a 4.7% growth in China’s GDP for the April-June period, the slowest since the first quarter of 2023, and below the forecasted 5.1% growth expected in a Reuters poll.

This slowdown was compounded by a protracted property downturn and widespread job insecurity, which have dampened fuel demand and led many Chinese refineries to cut back on production.

“Weaker economic data continues to flow from China as continued government support programs have been disappointing,” said Dennis Kissler, Senior Vice President of Trading at BOK Financial. “Many of China’s refineries are cutting back on weaker fuel demand.”

Despite the bearish sentiment from China, there is a growing consensus among market participants that the U.S. Federal Reserve could begin cutting its key interest rates as soon as September.

This speculation has helped stem the decline in oil prices, as lower interest rates reduce the cost of borrowing, potentially boosting economic activity and oil demand.

Federal Reserve Chair Jerome Powell noted on Monday that the three U.S. inflation readings over the second quarter “add somewhat to confidence” that the pace of price increases is returning to the central bank’s target in a sustainable fashion.

This has led market participants to believe that a turn to interest rate cuts may be imminent.

Also, U.S. crude oil inventories provided a silver lining for the oil market. According to market sources citing American Petroleum Institute figures, U.S. crude oil inventories fell by 4.4 million barrels last week.

This was a much steeper drop than the 33,000 barrels decline that was anticipated, indicating strong domestic demand.

The International Monetary Fund (IMF) also weighed in, suggesting that while the global economy is set for modest growth over the next two years, risks remain.

The IMF noted cooling activity in the U.S., a bottoming-out in Europe, and stronger consumption and exports for China as key factors in the global economic landscape.

In summary, while oil prices are currently pressured by concerns over China’s economic slowdown, the potential for U.S. interest rate cuts and stronger domestic demand for crude are providing some support.

Market watchers will continue to monitor economic indicators and inventory levels closely as they gauge the future direction of oil prices.

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OPEC+ Production Cuts Set to Balance Global Oil Market, Says Russian Deputy PM

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In a statement on Monday, Russian Deputy Prime Minister Alexander Novak expressed confidence that the global oil market will achieve balance in the second half of 2024, thanks to the production cut strategies implemented by the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+.

OPEC+, which includes major oil-producing countries such as Saudi Arabia and Russia, has been actively managing oil output to stabilize the market since late 2022.

In their most recent meeting on June 2, the group agreed to extend their latest production cut of 2.2 million barrels per day (bpd) until the end of September. This cut is scheduled to be gradually phased out starting in October.

“The market will always be balanced thanks to our actions,” Novak stated, emphasizing the importance of the coordinated efforts by OPEC+ in maintaining market equilibrium.

The U.S. Energy Information Administration (EIA) recently projected that global oil demand will surpass supply by approximately 750,000 bpd in the latter half of 2024 due to the continued reduction in OPEC+ output.

This outlook was echoed in a report by OPEC last week, which highlighted an anticipated oil supply deficit in the coming months and into 2025.

Novak’s remarks come at a crucial time for the global oil market, which has experienced significant volatility over the past year.

The OPEC+ alliance has been pivotal in mitigating some of this instability by adjusting production levels in response to fluctuating demand and other market dynamics.

Analysts suggest that the measures taken by OPEC+ will play a vital role in ensuring that the oil market remains stable as the world continues to navigate economic uncertainties and fluctuating energy demands.

The production cuts are expected to support oil prices by limiting supply, thereby helping to balance the market.

The impact of these production cuts is already being felt, with oil prices showing signs of stabilization.

However, the market remains sensitive to geopolitical developments and economic trends, which could influence future supply and demand dynamics.

As OPEC+ prepares to unwind some of its production cuts in the coming months, industry observers will be closely monitoring the market’s response.

The gradual phasing out of the cuts is designed to prevent any sudden shocks to the market, allowing for a smoother transition and sustained balance.

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Oil Prices Steady Amid U.S. Political Uncertainty and Middle East Tensions

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Oil prices held firm on Monday as the political uncertainty in the United States and ongoing tensions in the Middle East persist.

Brent crude oil, against which Nigerian oil is priced,  fell slightly by 13 cents, or 0.2%, to $84.90 a barrel after a 37-cent drop on Friday.

Similarly, U.S. West Texas Intermediate crude stood at $82.15 a barrel, down 6 cents, or 0.1%.

The dollar’s strength, which followed a failed assassination attempt on U.S. presidential candidate Donald Trump, exerted some pressure on oil prices.

A stronger dollar typically makes oil more expensive for buyers using other currencies, leading to reduced demand.

“I don’t think you can ignore the uncertainty that the weekend’s assassination attempt will cast across a deeply divided country in the lead-up to the election,” said Tony Sycamore, market analyst at IG.

In the Middle East, efforts to end the Gaza conflict between Israel and Hamas stalled over the weekend.

Talks were halted after three days, although a Hamas official indicated that the group had not withdrawn from discussions.

The situation escalated further when an Israeli attack targeting a Hamas military leader killed 90 people on Saturday, maintaining the geopolitical premium on oil.

Despite these geopolitical tensions, oil markets remain supported by supply cuts from OPEC+. Iraq’s oil ministry has pledged to compensate for any overproduction since the beginning of the year, reinforcing the market’s stability.

Last week, Brent fell more than 1.7% after four weeks of gains, while WTI futures slid 1.1%. The decline was largely attributed to a fall in China’s crude imports, which countered robust summer consumption in the United States.

“While fundamentals are still supportive, there are growing demand concerns, largely emanating from China,” noted ING analysts led by Warren Patterson.

China’s crude oil imports fell 2.3% in the first half of this year to 11.05 million barrels a day, with disappointing fuel demand and reduced output by independent refiners due to weak profit margins.

Also, crude throughput at Chinese refineries dropped 3.7% in June from a year earlier to 14.19 million barrels per day, marking the lowest level this year, according to customs data.

China’s economy has slowed in the second quarter, weighed down by a protracted property downturn and job insecurity, keeping alive expectations that Beijing will need to implement more stimulus measures.

In the United States, the active oil rig count, an early indicator of future output, fell by one to 478 last week, marking the lowest level since December 2021, according to energy services firm Baker Hughes.

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