The Nation Newspaper

Tag: Oil dips

  • Fed Govt retains $60 benchmark as oil dips to $58

    SHOULD oil prices continue to dip, funding next year’s N8.73 trillion budget may be tough for the Federal Government.

    Brent declined 2.01 per cent to $58.41 a barrel yesterday on the back of global equity sell-offs and continued concerns that the Organisation of Petroleum Exporting Countries (OPEC)/non-OPEC cuts may not be enough to rebalance an oversupplied market

    But a source within the Presidency said there was nothing to worry over the slide, saying it was marginal.

    “We will still retain the benchmark at $60 per barrel because industry experts have said the oil price fluctuations are temporary. There is no cause for alarm at all,” the source told The Nation last night, pleading for anonymity.

    The plunge was amid fears of slowing global economic growth.

    Oil price was down 51 cents (or nearly one per cent), at $59.77 per barrel after it earlier rose as high as $61.21 on Monday.

    WTI Crude was down below the $50 handle, having dropped 2.27 per cent to $49.00.

    The N8.73 trillion Budget 2019 proposal, billed for presentation today by President Muhammadu Buhari to the joint session of the National Assembly, was prepared on an oil price benchmark of $60 per barrel.

    The government is proposing  $56.5 per barrel for 2020 and $56.5 for 2021. Oil production is estimated at 2.3 million barrels per day (mbpd), 2.44 mbpd and 2.62mbpd for 2019, 2020 and 2021.

    The exchange rate is projected at N305 to $1 for the three years, while inflation remained almost constant at 9.98 for 2019, 9.43 for 2020 and 9.58 for 2021 as against 11.78 for 2018.

    The oil benchmark for this year’s budget was initially put at $45 but later raised to $51 per barrel by the National Assembly.

    Crude oil production was bench-marked at 2.3 million pbpd and exchange rate of N305 to one dollar.

    The oil Gross Domestic Product (GDP) for the same period was projected at N11,163.5 billion, N10,769.3 billion and N10,183.4 billion and the non-oil GDP for the next three years (2019, 2020 and 2021) was projected at N128,489.3 billion, N143,921.2 billion and N161,017 billion.

    The total GDP for the period under review was put at N139, 652.7 billion, N154, 690.6 billion and N171,200.5 billion with the GDP growth rate at 3.0 for 2019, 3.6 (2020) and 3.9 (2012).

    Energy sector analysts say the continued slide in oil prices portends grave dangers to the implementation of next year’s budget.

    “Though about N400 billion lower than that of the outgoing year, the slide will surely take a toll on the budget because the nation relies heavily on oil earnings for its foreign exchange,” an analyst said.

     

  • Oil dips to $84.75, as IMF cuts down outlook

    Brent crude prices, yesterday, slipped to $84.75 per barrel, following the decision by the International Monetary Fund (IMF) to lower its growth forecasts.

    Benchmark Brent crude was down 25 cents at $84.75 a barrel by 0735 GMT after a 1.3 per cent gain on Tuesday. US light crude was 25 cents lower at $74.71

    The International Monetary Fund downgraded its global economic growth forecasts for 2018 and 2019(two days ago) Tuesday, raising concerns that demand for oil products may slump as well.

    However, markets were supported as Hurricane Michael moved towards Florida causing the shutdown o of nearly 40 per cent of US Gulf of Mexico crude production.

    Trade tensions and rising import tariffs are taking a toll on international commerce, while emerging markets struggle with tighter financial conditions a ..

    “Prices are peaking at the most opportunistic time given the waning global growth narrative,” said Stephen Innes, head of trading APAC at OANDA in Singapore.

     

    In the United States, nearly 40 per cent of daily crude oil production was lost from offshore US Gulf of Mexico wells on Tuesday because of platform evacuations and shut-ins ahead of Hurricane Michael.

    Michael has strengthened into an “extremely dangerous” Category 4 hurricane, according to the latest advisory from the US National Hurricane Center.

    Oil producers evacuated personnel from 75 platforms as the storm made its way through the central Gulf on the way to landfall on Wednesday on the Florida Panhandle.

     

    The country’s largest privately owned crude terminal, the Louisiana Offshore Oil Port, said late on Tuesday it halted operations at its marine terminal.

     

    The facility is the only US port able to fully load and unload tankers with a capacity of 2 million barrels of oil.

     

    Companies turned off daily production of about 670,800 barrels of oil and 726 million cubic feet of natural gas by midday on Tuesday, according to offshore regulator the Bureau of Safety and Environmental Enforcement.

     

     

  • Oil dips as China-U.S trade tensions deepen

    Oil prices edged lower yesterday as investors focused on deepening trade tension between the United States (U.S.) and China that is expected to dent global crude demand, but losses were limited as the market weighed potential supply tightening due to Iran sanctions.

    Brent crude futures fell 11 cents to $77.99 a barrel, while U.S. West Texas Intermediate (WTI) crude futures slipped 8 cents to settle at $68.91 a barrel.

    U.S. President Donald Trump is likely to announce new tariffs on about $200 billion on Chinese imports as early yesterday, a senior administration official told Reuters on Saturday.

    U.S. stock indexes broadly fell yesterday, weighing on oil futures, on expectations that Trump would go ahead with the new tariffs and that Beijing would retaliate.

    The trade dispute is raising concerns about the potential for slower growth in oil consumption, offsetting supply concerns stemming from the upcoming U.S. sanctions on Iran.

    Speaking on the development, an analyst at Price Futures Group, Phil Flynn said:”The uncertainty surrounding the trade war is definitely something the market is concerned about in the short-term.”

    Sanctions affecting Iran’s petroleum sector will come into force from Nov. 4. Iranian crude oil export loadings have declined by 580,000 barrels per day in the past three months, Bank of America Merrill Lynch analysts said in a note to clients.

    “We believe that the full effect of the Iranian oil sanctions has yet to be seen and we feel that the next 5-6 week anticipatory phase of the official sanctions will associate with steady speculative buying interest,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

    Iran’s oil exports have been falling in recent months as more buyers, including its second-largest buyer India, cut imports ahead of U.S. sanctions that take effect in November. Washington aims to cut Iran’s oil exports down to zero to force Tehran to re-negotiate a nuclear deal.

    Since spring when the Trump Administration said it would impose the sanctions, crude traders have priced in a risk premium reflecting the supply shortages that may occur when exports from Iran, the third-largest Organisation of Petroleum Exporting Countries (OPEC) producer, are cut.

    U.S. Energy Secretary Rick Perry told Reuters at the weekend that he did not expect any price spikes and that Saudi Arabia, the U.S and Russia could between them raise global output in the next 18 months.

    Yesterday, Russian Energy Minister Alexander Novak said all possible scenarios for oil output could be discussed at a meeting of OPEC and non-OPEC states in Algeria this month.

    State oil giant Saudi Aramco will spend more than 500 billion riyals ($133 billion) on oil and gas drilling over the next decade, a senior company executive said.

  • Oil dips on OPEC output increase

    Brent crude oil fell by more than one percent yesterday as investors prepar ed for the extra one million barrels per day (bpd) output increase the Organisation of Petroleum Exporting Countries (OPEC) and its partners including Russia agreed to bring to the market after their meeting on Staurday in Vienna, Austria.

    Brent crude futures fell $1.16 to $74.39 a barrel while U.S. light crude was up 16 cents at $68.74 a barrel, supported in part by a Canadian supply outage.

    Prices initially jumped after an OPEC deal to increase output was announced late last week, as it was not seen boosting supply by as much as some had expected.

    Despite the increase, which is intended to stop the gap between global supply and demand from becoming too wide, analysts said global oil markets would likely remain relatively tight this year.

    OPEC and non-OPEC partners including Russia have since 2017 cut output by 1.8 million bpd to tighten the market and prop up prices.

     

  • Oil dips after rising above $50

    Oil prices dipped yesterday in United States (U.S.) trading, as nagging worries about abundant global crude supplies dragged prices lower after an early rally pushed Brent above $50 per barrel for the first time since early June.

    Traders predicted prices would hold near current levels ahead of Monday’s meeting between key Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC producers in St. Petersburg, Russia. The market has been watching reports that Saudi Arabia, the world’s largest crude producer, is considering an additional supply cut to bring markets into balance.

    Nigeria’s budget of N7.44trillion was benchmarked  at an oil price of $44.5 per barrel and production of 2.2million barrels per day.

    The Financial Times reported two days ago that the Saudis were considering additional cuts, citing a consultant’s report. On Tuesday, Reuters reported the country was committed to working with other countries to draw down stocks, taking into account the surprising increase in production from OPEC members Nigeria and Libya.

    The OPEC and non-OPEC allies, including Russia, agreed last year to cut production by 1.8 million bpd a day; that deal has been extended to March 2018.

    Brent futures stood at $49.62 a barrel at 11:27 a.m. EDT, down 7 cents. U.S. West Texas Intermediate (WTI) crude futures were at $47.01 a barrel, 11 cents lower.

    In early trade, both benchmarks rose to their highest since June 7, after rallying in the previous session on data showing U.S. crude and fuel inventories fell sharply last week.

    U.S. crude inventories dropped by 4.7 million barrels in the week to July 14, according to the Energy Information Administration, more than forecast.

    Gasoline stocks fell by 4.7 million barrels, exceeding expectations, while distillate stocks also fell.

    “I’m skeptical, after seeing many years of drawdowns in summer driving season,” said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut. “We’re waiting to see if this is really what’s going on or the normal seasonal drop-off.”

    U.S. oil stocks, at roughly 490 million barrels, remain well above the five-year average, while U.S. production has increased almost 12 per cent since mid-2016 to 9.4 million barrels per day (bpd).

    Oil futures also fell in tandem with other risk markets in the mid-morning after Bloomberg reported that Robert Mueller, special counsel appointed to investigate allegations of Russian interference in the 2016 election and possible ties with U.S. President Donald Trump’s administration, was also looking into Trump’s business transactions. Stock markets and the dollar dropped on that news before recovering somewhat.