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Oil Prices Plunge to 5-Month Low on Thursday

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  • Oil Prices Plunge to 5-Month Low on Thursday

Oil prices plummeted to its lowest in five months after data showed the U.S. rising oil production would offset efforts by the OPEC to moderate prices.

The global oil prices which started falling on Monday following a report that hedge funds and money managers have started cutting bullish positions, dip lower on Thursday to reach its pre-OPEC consensus level.

Since Monday, the WTI has dropped about 9 percent to $45.60, its lowest since November 2016. While the Brent Crude has plunged as much as 8 percent to trade at $48.83, the lowest price level this year.

Experts have said the uncertainty surrounding OPEC policy and the continuous rise of the U.S. oil production will continue to weigh on global oil outlook in the medium term.

“With the future of OPEC policy unclear, the trend of rising U.S. production remains the single biggest headwind for oil prices in the medium term,” said Tyler Richey, co-editor of the Sevens Report.

However, analysts have said OPEC would have to cut more than the 1.8 million barrels a day it cut in November to curtail global glut and normalize prices.

“An extension would be mildly supportive of oil, but because of the recent rise in U.S. production, the effect of OPEC policy on global inventories has been limited and deeper cuts to member production are likely needed to really ignite a rally through the mid $50/barrel level,” said Richey.

Brent crude oil has now erased all its gains since OPEC reached accord on November 30, 2016.

Also, currencies of commodity-dependent economies like the Canadian dollar, Aussie, etc. plunged against the U.S. dollar this week, reaching their lowest exchange rate this year.

According to Samed Olukoya, a foreign exchange research analyst at Investors King Ltd., “The issue is not just the rising U.S. oil production, but also the surge in production level of OPEC members exempted from production cut in November. For instance, Libya has announced that the El-Feel oilfield is ready to resume production after two years, this is an oil field that has a production capacity of 80,000 barrels per day. Likewise, Nigeria is struggling to up its output from about 1.5 million barrels per day to 2 million barrels per day. All these add up to what trigger the sell-off and are expected to further hurt investment in the oil sector if not checked.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade long experience in the global financial market.

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Economy

Brent Crude Oil Maintains $43 Per Barrel Despite Surge in US Inventories

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Oil

Brent Crude Oil Sustains Upsurge Despite Rising US Inventories

Brent crude oil, against which Nigerian oil is priced, sustained its upsurge at $43 per barrel on Wednesday during the London trading session despite a report showing a build-up in the U.S. crude inventories in the week ended July 3, 2020.

Brent crude oil

According to the U.S Energy Information Administration (EIA) report released on Tuesday, crude oil production in the U.S is expected to decline by just 70,000 barrels per day from the 670,000 bpd previously predicted to 600,000 bpd.

While this was below the projected decline, it also points to a build-up in U.S stockpiles and suggested that oil production from the world’s largest economy may not decline as previously projected in 2020.

“The EIA’s forecast of a lower decline in U.S. output was partially offset by its outlook for firm demand recovery, which limited losses in oil markets,” Hiroyuki Kikukawa, general manager of research at Nissan Securities said.

“Still, expectations that the Organization of the Petroleum Exporting Countries (OPEC) and allies would taper oil output cuts from August and softer U.S. equities added to pressure,” he said.

The EIA projected that global oil demand will recover through the end of 2021 as demand was predicted to hit 101.1 million barrels per day in the fourth quarter of the year.

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Economy

Illegal Withdrawals: Rep To Investigate NNPC, NLNG Over $1.05bn

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Rep To Investigate NNPC, NLNG Over Illegal Withdrawal of $1.05bn from NLNG Account

The Nigerian House of Representatives has concluded plans to investigate illegal withdrawal of $1.05 billion from the account of the Nigerian Liquefied Natural Gas Limited (NLNG) by the Nigerian National Petroleum Corporation (NNPC).

The decision followed the adoption of a motion titled ‘Need to Investigate the Illegal Withdrawals from the NLNG Dividends Account by the Management of NNPC’ moved by the Minority Leader, Ndudi Elumelu, on Tuesday.

The House adopted the motion and mandated its Committee on Public Accounts to “invite the management of the NNPC as well as that of the NLNG, to conduct a thorough investigation on activities that have taken place on the dividends account and report back to the House in four weeks.”

Elumelu said, “The House is aware that the dividends from the NLNG are supposed to be paid into the Consolidated Revenue Funds account of the Federal Government and to be shared amongst the three tiers of government.

“The House is worried that the NNPC, which represents the government of Nigeria on the board of the NLNG, had unilaterally, without the required consultations with states and the mandatory appropriation from the National Assembly, illegally tampered with the funds at the NLNG dividends account to the tune of $1.05bn, thereby violating the nation’s appropriation law.

“The House is disturbed that there was no transparency in this extra-budgetary spending, as only the Group Managing Director and the corporation’s Chief Financial Officer had the knowledge of how the $1.05bn was spent.

“The House is concerned that there are no records showing the audit and recovery of accrued funds from the NLNG by the Office of the Auditor-General of the Federation, hence the need for a thorough investigation of the activities on the NLNG dividends account.”

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FG Gives Radio, Tv Stations Debt Relief, Writes Off 60 Percent Debt

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TSTV

FG Reduces Tv, Radio Stations Licence Fee by 30%, Writes Off 60% Debt

The Federal Government has reduced the existing licence fee paid by all open terrestrial radio and television stations by 30 percent.

The Minister of Information and Culture, Lai Mohammed, disclosed this at a press conference in Abuja on Monday.

He said the Federal Government has also decided to write off 60 percent of the N7 billion loan owed the government by television and radio stations.

He explained that the N7 billion is the total outstanding from television and radio stations on the renewal of their operating licences.

Mohammed, however, said for any station to benefit from the 60 percent debt relief, such a station must be ready and willing to pay the remaining 40 percent within the next three months.

According to him, the debt relief offer would open on July 10th and close on the 6th of October.

Mohammed said, “According to the NBC, many Nigerian radio and television stations remain indebted to the Federal Government to the tune of N7bn.

“Also, many of the stations are faced with the reality that their licences will not be renewed, in view of their indebtedness.

“Against this background, the management of the NBC has therefore recommended, and the Federal Government has accepted, the following measures to revamp the broadcast industry and to help reposition it for the challenges of business, post-COVID-19:

“(a) 60 per cent debt forgiveness for all debtor broadcast stations in the country; (b) the criterion for enjoying the debt forgiveness is for debtor stations to pay 40 per cent of their existing debt within the next three months.

“(c) Any station that is unable to pay the balance of 40 per cent indebtedness within the three-month window shall forfeit the opportunity to enjoy the stated debt forgiveness.

“(d) The existing license fee is further discounted by 30 per cent for all open terrestrial radio and television services effective July 10, 2020.

“(e) The debt forgiveness shall apply to functional licensed terrestrial radio and television stations only. (f) The debt forgiveness and discount shall not apply to pay TV service operators in Nigeria.”

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