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OPEC’s Newest Member Calls on African Nations to Join Oil Group

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  • OPEC’s Newest Member Calls on African Nations to Join Oil Group

Equatorial Guinea, OPEC’s newest member, called on fellow African producers to band together to protect the value of their oil resources and join the group.

As more discoveries are made across the continent, cooperation among producers is key, the nation’s Minister of Mines, Industry and Energy Gabriel Obiang told a conference in Cape Town. “Have a principle and defend your base,” he said, wryly referencing a strategy of U.S. President Donald Trump.

Equatorial Guinea joined the Organization of Petroleum Exporting Countries last month, making the group the largest it’s ever been. Although small, the country is sub-Saharan Africa’s third-biggest oil producer, after Nigeria and Angola. Like other oil-rich nations, including top exporter Saudi Arabia, Equatorial Guinea is preparing for a world where energy demand veers away from crude.

“If in 10 years, oil becomes a commodity that the developed countries don’t want — they want to focus on just gas, solar — what are the African countries going to do?” Obiang said Tuesday. “It’s very important to know what our brothers, our bigger brothers in the region, what Nigeria is doing, what Algeria is doing” and communicate that throughout the continent, he said.

While the International Energy Agency currently forecasts an increase in global oil consumption over the next two decades, it has outlined alternative scenarios in which fuels such as natural gas could displace about 13.5 million barrels of demand by 2040, while efficiency gains and a move to electric cars could remove millions more. An organization such as OPEC is vital in supporting oil producers as the energy landscape changes, according to Obiang.

OPEC Platform

“African countries that are producing the same as Equatorial Guinea, or even more than Equatorial Guinea, I encourage them to join OPEC because that’s the platform that is definitely going to be fighting for your own resources,” he said.

The country in West Central Africa is pushing to increase its own oil production to 300,000 barrels a day in two years and 500,000 a day in five years, from about 269,000 a day now. It opened a licensing round last year to bring in foreign investors for exploration projects.

“The key thing for us is: to have more production, we have to have more discoveries,” Obiang said.

Winners of the licensing round, including Exxon Mobil Corp. and Ophir Energy Plc, were announced Monday.

Obiang is one of the younger sons of President Teodoro Obiang, the longest-running head of state in Africa. Teodoro Obiang assumed power in 1979 in a military coup that ousted his own uncle, Francisco Macias, who had ruled the country since independence from Spain in 1968.

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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Crude Oil

Oil Prices Sink 1% as Israel-Hamas Talks in Cairo Ease Middle East Tensions

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Crude oil - Investors King

Oil prices declined on Monday, shedding 1% of their value as Israel-Hamas peace negotiations in Cairo alleviated fears of a broader conflict in the Middle East.

The easing tensions coupled with U.S. inflation data contributed to the subdued market sentiment and erased gains made earlier.

Brent crude oil, against which Nigerian oil is priced, dropped by as much as 1.09% to 8.52 a barrel while West Texas Intermediate (WTI) oil fell by 0.99% to $83.02 a barrel.

The initiation of talks to broker a ceasefire between Israel and Hamas played a pivotal role in moderating geopolitical concerns, according to analysts.

A delegation from Hamas was set to engage in peace discussions in Cairo on Monday, as confirmed by a Hamas official to Reuters.

Also, statements from the White House indicated that Israel had agreed to address U.S. concerns regarding the potential humanitarian impacts of the proposed invasion.

Market observers also underscored the significance of the upcoming U.S. Federal Reserve’s policy review on May 1.

Anticipation of a more hawkish stance from the Federal Open Market Committee added to investor nervousness, particularly in light of Friday’s data revealing a 2.7% rise in U.S. inflation over the previous 12 months, surpassing the Fed’s 2% target.

This heightened inflationary pressure reduced the likelihood of imminent interest rate cuts, which are typically seen as stimulative for economic growth and oil demand.

Independent market analysts highlighted the role of the strengthening U.S. dollar in exacerbating the downward pressure on oil prices, as higher interest rates tend to attract capital flows and bolster the dollar’s value, making oil more expensive for holders of other currencies.

Moreover, concerns about weakening demand surfaced with China’s industrial profit growth slowing down in March, as reported by official data. This trend signaled potential challenges for oil consumption in the world’s second-largest economy.

However, amidst the current market dynamics, optimism persists regarding potential upside in oil prices. Analysts noted that improvements in U.S. inventory data and China’s Purchasing Managers’ Index (PMI) could reverse the downward trend.

Also, previous gains in oil prices, fueled by concerns about supply disruptions in the Middle East, indicate the market’s sensitivity to geopolitical developments in the region.

Despite these fluctuations, the market appeared to brush aside potential disruptions to supply resulting from Ukrainian drone strikes on Russian oil refineries over the weekend. The attack temporarily halted operations at the Slavyansk refinery in Russia’s Krasnodar region, according to a plant executive.

As oil markets navigate through geopolitical tensions and economic indicators, the outcome of ongoing negotiations and future data releases will likely shape the trajectory of oil prices in the coming days.

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Commodities

Cocoa Fever Sweeps Market: Prices Set to Break $15,000 per Ton Barrier

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Cocoa

The cocoa market is experiencing an unprecedented surge with prices poised to shatter the $15,000 per ton barrier.

The cocoa industry, already reeling from supply shortages and production declines in key regions, is now facing a frenzy of speculative trading and bullish forecasts.

At the recent World Cocoa Conference in Brussels, nine traders and analysts surveyed by Bloomberg expressed unanimous confidence in the continuation of the cocoa rally.

According to their predictions, New York futures could trade above $15,000 a ton before the year’s end, marking yet another milestone in the relentless ascent of cocoa prices.

The surge in cocoa prices has been fueled by a perfect storm of factors, including production declines in Ivory Coast and Ghana, the world’s largest cocoa producers.

Shortages of cocoa beans have left buyers scrambling for supplies and willing to pay exorbitant premiums, exacerbating the market tightness.

To cope with the supply crunch, Ivory Coast and Ghana have resorted to rolling over contracts totaling around 400,000 tons of cocoa, further exacerbating the scarcity.

Traders are increasingly turning to cocoa stocks held in exchanges in London and New York, despite concerns about their quality, as the shortage of high-quality beans intensifies.

Northon Coimbrao, director of sourcing at chocolatier Natra, noted that quality considerations have taken a backseat for most processors amid the supply crunch, leading them to accept cocoa from exchanges despite its perceived inferiority.

This shift in dynamics is expected to further deplete stocks and provide additional support to cocoa prices.

The cocoa rally has already seen prices surge by about 160% this year, nearing the $12,000 per ton mark in New York.

This meteoric rise has put significant pressure on traders and chocolate makers, who are grappling with rising margin calls and higher bean prices in the physical market.

Despite the challenges posed by soaring cocoa prices, stakeholders across the value chain have demonstrated a willingness to absorb the cost increases.

Jutta Urpilainen, European Commissioner for International Partnerships, noted that the market has been able to pass on price increases from chocolate makers to consumers, highlighting the resilience of the cocoa industry.

However, concerns linger about the eventual impact of the price surge on consumers, with some chocolate makers still covered for supplies.

According to Steve Wateridge, head of research at Tropical Research Services, the full effects of the price increase may take six months to a year to materialize, posing a potential future challenge for consumers.

As the cocoa market continues to navigate uncharted territory all eyes remain on the unfolding developments, with traders, analysts, and industry stakeholders bracing for further volatility and potential record-breaking price levels in the days ahead.

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Crude Oil

IOCs Stick to Dollar Dominance in Crude Oil Transactions with Modular Refineries

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Crude Oil - Investors King

International Oil Companies (IOCs) are standing firm on their stance regarding the currency denomination for crude oil transactions with modular refineries.

Despite earlier indications suggesting a potential shift towards naira payments, IOCs have asserted their preference for dollar dominance in these transactions.

The decision, communicated during a meeting involving indigenous modular refineries and crude oil producers, shows the complex dynamics shaping Nigeria’s energy landscape.

While the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) had previously hinted at the possibility of allowing indigenous refineries to purchase crude oil in either naira or dollars, IOCs have maintained a firm stance favoring the latter.

Under this framework, modular refineries would be required to pay 80% of the crude oil purchase amount in US dollars, with the remaining 20% to be settled in naira.

This arrangement, although subject to ongoing discussions, signals a significant departure from initial expectations of a more balanced currency allocation.

Representatives from the Crude Oil Refinery Owners Association of Nigeria (CORAN) said the decision was not unilaterally imposed but rather reached through deliberations with relevant stakeholders, including the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

While there were initial hopes of broader flexibility in currency options, the dominant position of IOCs has steered discussions towards a more dollar-centric model.

Despite reservations expressed by some participants, including modular refinery operators, the consensus appears to lean towards accommodating the preferences of major crude oil suppliers.

The development underscores the intricate negotiations and power dynamics shaping Nigeria’s energy sector, with implications for both domestic and international stakeholders.

As discussions continue, attention remains focused on how this decision will impact the operations and financial viability of modular refineries in Nigeria’s evolving oil landscape.

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