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US Oil Output Disrupting Market Rebalancing – OPEC

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  • US Oil Output Disrupting Market Rebalancing

Increased oil production in the United States is hampering efforts to balance out market supply and demand, OPEC said on Tuesday.

While a “rebalancing of the market” was “underway,” it was “at a slower pace than originally anticipated,” the Organization of Petroleum Exporting Countries wrote in its latest monthly oil market report.

This was “due to changes in fundamentals, especially the shift in US supply from a forecast contraction to positive growth,” the report said.

And it was being observed, “despite the very high overall conformity to the production adjustments in the first four months of 2017,” OPEC added.

Back in November, OPEC members agreed to cut production by 1.2 million barrels per day for six months beginning from the start of the year in a bid to reduce the glut of oil supplies on the shore up prices.

Non-cartel producers led by Russia partially matched the cuts.

The measures helped stabilise oil prices at the beginning of the year, with the international benchmark Brent crude sticking above $50 per barrel.

And at a meeting at the end of May, both OPEC and non-OPEC countries decided to roll over the output cuts for a further nine months.

Nevertheless, increased output in the US was getting in the way of the rebalancing process, OPEC complained.

Brent has dropped back below $50 since the OPEC meeting.

American producers have benefitted from the OPEC and non-OPEC efforts to push prices higher.

Shale producers, in particular, can react quickly to market developments, because they are less capital intensive than other ventures.

And they have racked up production as prices rise.

The bulk of the upward adjustment in non-OPEC oil supply since December “has come from the US,” OPEC said.

And that was skewing the market.

“The revisions to non-OPEC supply growth have been much greater than the upward adjustments to world oil demand growth, accentuating the imbalance in the market,” it said.

Looking at anticipated growth in global oil demand this year, OPEC reiterated its forecast of 1.27 million barrels per day (bpd).

With regard to the global economic outlook for 2017, stronger-than-anticipated momentum since the beginning of the year led to an upwards revision in the growth forecast to 3.4 percent following growth of 3.1 percent in 2016, OPEC said.

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

Oil Prices Decline on Rising COVID-19 Cases

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Global Oil Prices Dipped on Friday as New COVID-19 Cases Jump Globally

Global oil prices decline on Friday as the number of confirmed COVID-19 cases surged across the world.

Brent crude oil, against which Nigerian oil is priced, declined from $43.47 per barrel it traded on Thursday during the Asian trading session to $41.60 per barrel on Friday at around 11:39 am Nigerian time.

global Oil prices While the price of US West Texas Intermediate (WTI) crude oil dipped from $40.97 per barrel it traded on Thursday to $38.78 on Friday.

Oil traders and investors are worried that the rising number of COVID-19 new cases would disrupt demand for the commodity and force refineries to shut down once again.

“I do not suspect many oil traders will be looking to place significant bids in the market today, suggesting prices may continue to wallow into the weekend,” said Stephen Innes, chief global markets strategist at AxiCorp.

Despite efforts by both OPEC plus and other top oil producers to halt falling oil prices and reduce global oil glut, the lack of a cure for COVID-19 remained global concerns.

As previously stated on this platform, until a cure is found the world would have to find a way to either work through COVID-19 or shut down activities completely.

This is coming a day after the Federal Government of Nigeria announced that it was putting school resumption plan on hold following the latest COVID-19 report that shows Nigeria’s confirmed cases crossed 30,000 on Wednesday.

In the United States, more than 60,000 new COVID-19 cases were reported on Thursday, forcing lawmakers to start contemplating the second phase of COVID-19 lockdown.

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Economy

We Are Losing N13.9bn Monthly Because FG Caps Tariff – Discos

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Discos Says it is Losing N14bn Monthly Because of NERC Capped Tariff

The Nigerian power Distribution Companies (Discos) have said they a losing N13.9 billion in revenue every month because the Nigerian Electricity Regulatory Commission, limited how much they can charge for consumption.

Ernest Mupwaya, the Managing Director, Abuja Electricity Distribution Company, made the statement during a presentation on behalf of the Discos to the House of Representatives Committee on Power.

The statement was after the Discos demanded realistic indices before the implementation of the proposed service reflective tariff, which was supposed to be implemented on July 1.

Mupwaya said there were some outstanding requirements before the service reflective tariff could be implemented.

“One of them is the removal of estimated billing caps. The financial impact of the Capping Order is an average loss of N13.9bn monthly, thereby, undermining or jeopardising the minimum remittance requirement,” Mupwaya stated.

The July 1 service tariff implementation was halted by members of the National Assembly, who prevailed on the Discos to shelve the date to the first quarter of 2021 due to the current economic challenges in Nigeria.

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Gbajabiamila Says Nigeria Can’t Compete in AfCFTA With Weak Industries

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Nigeria Must Ramp up Industrialisation to Prevent Dumping by Other Nations

The Speaker of the House of Representatives, Femi Gbajabiamila, has said the nation can not compete effectively in the African Continental Free Trade Area (AfCFTA) with weak industrialisation and manufacturing activities.

Gbajabiamila disclosed this while receiving Adesoji Adesugba, the newly appointed Managing Director of the Nigeria Export Processing Zones Authority.

The details of the visit were made public on Thursday in a statement titled, “AFCFTA: House Speaker tasks Nigeria on industrialisation through free trade zones.”

Gbajabiamila was quoted as saying “We must act proactively so that we don’t become a dumping ground for other African nations.

“Our best option in this circumstance is to immediately set machinery in motion to ensure the effective functioning and flourishing of our export processing zones.

“We must remove all bottlenecks and perfect all stumbling blocks. We will then be fully prepared for AfCFTA and also generate massive jobs for our unemployed youths and enhance our foreign earnings.”

He added that the nation must as a matter of national emergency ramp up industrialisation through free trade zones and other effective means to compete with South Africa, Africa’s most industrialised economy and other African nations.

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