The Nation Newspaper

Tag: Organisation of Petroleum Exporting Countries

  • Oil hits $66 on cuts signal

    Oil surged to a five-week high on Monday after Saudi Arabia and Russia signalled an extension of the non-members of the Organisation of Petroleum Exporting Countries (OPEC+) output cuts and a United States (U.S.)-China agreement to restart trade talks improved the demand outlook.

    WTI oil for August delivery climbed $1.64 to $60.11 a barrel on the New York Mercantile Exchange  in London. The contract added 9.3 per cent last month.

    Brent for September rose $1.84, or 2.8 per cent, to $66.58 a barrel on the ICE Futures Europe Exchange. The August contract expired Friday. The benchmark global crude traded at a premium of $6.43 to WTI.

    Consistent rise in oil prices, analysts say, is good for the implementation Nigeria’s  N8.91 trillion budget 2019. The country, a member of OPEC, relies on crude oil sale for foreign exchange (forex) to implement development projects.

    The budget was based on estimated crude production of 2.3 million barrels a day, oil price benchmark of $60 per barrel and an exchange rate of N305 to the dollar.

    The Senate had increased the 2019 budget by N80 billion, up from the N8.83 trillion presented by President Muhammadu Buhari to lawmakers last year.

    Parliament said the 2019 budget was aimed at consolidating growth.

    It approved a budget deficit of N1.9 trillion, representing 1.37 per cent of GDP.

    Nigeria’s economy grew by 1.93 per cent last year, its fastest pace since a recession two years earlier, data showed, while inflation  11.40 per cent in May.

    Other OPEC members have indicated their support for the agreement between Russian President Vladimir Putin and Saudi Crown Prince Mohammed Bin Salman to prolong the curbs by six to nine months as meetings on production policy start in Vienna. President Donald Trump and his Chinese counterpart Xi Jinping declared a truce to their trade war and the U.S. will hold off on imposing additional tariffs on China.

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    Oil rose by the most since January last month after escalating tensions in the Middle East spurred concerns over supply. Iran, Saudi Arabia’s political adversary, became the latest OPEC member to back extending the group’s output curbs for as long as nine months as ministers seek to counter a weak demand outlook and surging American production.

    “A broad consensus around extension is forming without much opposition as the producer group recognises it has two major issues to contend with,” said Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas SA.

    “The first being economic uncertainties tied to trade wars — despite this weekend’s positive Trump-Xi meeting — that can weaken global oil demand growth, and the second more obvious one, which is strong U.S. shale oil supply growth.”

    Nigeria, Venezuela, Iraq and Oman also expressed their conditional support for an extension of as long as nine months, which isn’t the OPEC policy playbook as the oil-club has traditionally aimed for half-year deals. The leaders of Russia and Saudi Arabia, the dominant members in the OPEC+ alliance, settled on the idea of extending the cuts into next year during the G-20 meeting in Japan.

    “The longer the horizon, the stronger the certainty to the market,” OPEC Secretary-General Mohammad Barkindo said on Sunday in Vienna after meeting with Saudi Energy Minister Khalid Al-Falih.

    The resumption of U.S.-China trade talks was a reprieve from a demand outlook that’s been hurt by the entrenched dispute. Still, the International Monetary Fund (IMF) Managing Director Christine Lagarde warned that the global economy is in a “rough patch” with unresolved issues on trade posing the most serious risk for the future.

    “What came out of the Trump-Xi meeting was probably the minimum,” said Vandana Hari, founder of Vanda Insights in Singapore. “It appears a little more positive than it actually is. I don’t expect a deal to happen anytime soon.”

  • Oil slips on supply disruptions, sanctions

    Brent crude oil futures yesterday slipped to $66.73 per barrel, down 30 cents, or 0.5 per cent over supply disruptions from the Organisation of Petroleum Exporting Countries (OPEC) production cutbacks and United States (U.S.) sanctions on Iran and Venezuela.

    U.S. West Texas Intermediate (WTI) futures were at $58.69 per barrel, down 35 cents, or 0.6 per cent.

    Both crude oil price benchmarks have slumped by almost three per cent since last week, hitting their highest since November last year.

    Concerns about a potential U.S. recession emerged Friday after cautious remarks by the U.S. Federal Reserve caused 10-year treasury yields to slip below the three-month rate for the first time since 2007.

    Historically, an inverted yield curve – where long-term rates fall below short-term – has signalled an upcoming recession.

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    Adding to concerns of a widespread global downturn, manufacturing output data from Germany, Europe’s biggest economy, shrunk for the third straight month.

    “Estimates for growth and earnings have been revised down materially across all major regions,’’ said U.S. bank, Morgan Stanley.

    ANZ bank said the darkening economic outlook “overshadowed the supply-side issues’’ the oil market was facing amid supply cuts, led by producer club OPEC as well as the U.S. sanctions on Venezuela and Iran.

  • Nigeria, three others nominated for OPEC+ committee

    Nigeria, Iraq, Kazakhstan and the United Arab Emirates (UAE) have been nominated  as members of the Joint Ministerial Monitoring Committee (JMMC) of the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC coalition, including Russia.

    The JMMC monitors and ensures compliance of members with production cut directives. The JMMC met in Baku, the Republic of Azerbaijan, for its 13th meeting. The Committee reviewed the monthly report prepared by its Joint Technical Committee (JTC) and recent developments in the global oil market as well as immediate prospects for the remainder of 2019.

    The JMMC reiterated the critical role that the “Declaration of Cooperation” has played in supporting oil market stability since December 2016 and took note of the expressed commitment of all participating countries to ensure that such stability continues on a sustainable basis, as overall conformity reached almost 90 per cent for the month of February 2019, which is up from 83 per cent in the month of January.

    The Committee recognised the current, critical uncertainties surrounding the global oil market throughout 2019, and stressed on the shared responsibility of all participating countries to restore market stability and prevent the recurrence of any market imbalance.

    All participating countries at the meeting, individually and collectively, assured the Committee that they will exceed their voluntary production adjustments over the coming months.

    The JMMC also urged all participating countries, including those not present at the meeting, to achieve full and timely conformity with their voluntary production adjustments under the decisions of the 175th Meeting of the OPEC Conference on December 6, 2018, and the 5th OPEC and non-OPEC Ministerial Meeting on December 7, 2018.

    In consideration that market fundamentals are unlikely to materially change in the next two months, the JMMC adopted a recommendation to forego the full Ministerial Meeting in April and instead schedule a JMMC meeting in May ahead of the OPEC meeting on June 25, during which a decision will be taken on the production target for the second half of 2019.

    The Committee also endorsed the adjustments of the baselines of three countries, Brunei, Daressalam, Ecuador and Malaysia.

    The JMMC thanked Azerbaijan President, Ilham Aliyev, for his hospitality and the support he has given to the “Declaration of Cooperation”. The Committee emphasised the unique role that Baku has played in the history of the oil industry and expressed its gratitude to all involved from Azerbaijan, particularly Minister of Energy, Parviz Shahbazov, for the excellent arrangements for the meeting.

    The JTC will continue its monthly meetings and the next meeting of the JMMC is scheduled to take place in May, in Jeddah, the Kingdom of Saudi Arabia.

  • Nigeria to consider reducing oil output for higher prices – Buhari

    President Muhammadu Buhari on Wednesday pledged the cooperation of Nigeria to the effort to reduce oil output in order to attract higher prices in the global market.

    Speaking at an audience with Mr Ahmad Qattan, Minister of State for African Affairs and Special Envoy of King Salman Bin Abdulaziz, Custodian of the Two Holy Mosques and King of Saudi Arabia, at the State House, Abuja, President Buhari said as a responsible member of the Organisation of Petroleum Exporting Countries (OPEC), Nigeria was willing to go along with the Saudi initiative in limiting output so that prices would go up.

    The President, in a statement by the Senior Special Assistant on Media and publicity, Garba Shehu, said output cuts had always been difficult for Nigeria considering the country’s peculiar circumstances of large population, huge expanse of land and state of under-development, adding, “I wish we can produce more.”

    He, however, said: “I have listened carefully to the message. I will speak with the Minister of State Petroleum. I will call for the latest production figures. I know that it is in our interest to listen. We will cooperate.”

    President Buhari explained that higher oil prices will make both nations stronger and their citizens more prosperous.

    He commended King Salman for his leadership in global oil matters, assuring that Nigeria will continue to accord respect to the Kingdom in that regard.

    The Special Envoy said he had brought special greetings from King Salman and the Crown Prince, and expressed their best wishes for Nigeria as the country goes into general elections.

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    Mr Qattan said the important reason for which King Salman sent him was to make a request to President Buhari to ensure Nigeria’s compliance with quotas assigned in January by exiting previous exemption from output cuts.

    He said his country had reduced its own output by 1.4 million barrels per day to ensure that prices went up, stressing however, that Saudi Arabia alone cannot bring stability to the oil market and shore up prices.

    The Special Envoy called for greater adherence to production cuts by Nigeria and hoped that he would take a positive message back home.

  • 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.

     

  • No oil-cuts deal as OPEC talks end

    •Cut tough for Nigeria

    THE Organisation of Petroleum Exporting Countries (OPEC) has ended talks in Vienna without a deal on oil production cuts.

    The size of Russia’s contribution remained a sticking point before further talks today.

    Saudi Arabia’s Energy Minister Khalid Al-Falih said he was not confident of an agreement, after discussions of a combined one million barrel-a-day output reduction concluded without a consensus.

    That left the oil market dangling in uncertainty before non-OPEC allies joined a second day of talks yesterday.

    “Not everybody is ready to cut equally,” Al-Falih told reporters in Vienna. “Russia is not ready for a substantial cut,” he said.

    Oil in London tumbled as much as 5.2 per cent to $58.36 a barrel, before paring losses to $59.34.

    Minister of State, Petroleum Resources Ibe Kachikwu, said the country cannot exceed 800,000 barrels per day or at most one million barrels per day, in view of the current state of the global oil industry.

    He said global oil industry is currently challenged as prices went down as low $65 per barrel at the market.

    Dr. Kachikwu said: “I do not see Nigeria exceeding 800,000 barrels or one million barrels per day, as the industry is industry is challenged today by factors that are beyond immediate solution. Prices have gone down to $61 per barrel, far from what it used to be in recent times.”

    The minister said prices of oil should be around $65 per barrel or $67, urging everybody to contribute their quota to the growth of the market.

    Kachikwu said: “Everybody should see his or her self-contributing to the industry positively. The bigger the size of the industry, the more difficult it is to contribute to and also the smaller the size of the sector is, the easier it is to contribute to its development.”

    OPEC conference President Suhail Mohamed Al Mazrouei, has acknowledged the receipt of Qatar’s notice to withdraw from the membership of the organisation from January 1.

    Al Mazrouei, who is also the UEA, Minister of Energy and Industry, made this known in his opening address at the 175th meeting of the OPEC conference in Vienna, Austria.

    A statement by the group reads: “It should also be noted that the Organisation has received a letter from the state of Qatar giving notice of its intention to withdraw from its membership of OPEC, pursuant to Article 8 of the OPEC Statute, with effect from 1 January 2019.”

    The Kingdom’s dependence on Russia shows how much OPEC has changed since 2016, when the two countries ended their historic animosity and started to manage the market together.

    “The alliance has transformed OPEC into a duopoly in which Russia, which isn’t a formal member of the cartel but part of the production-cuts alliance, is asserting its power.

    “The impression that the group can’t really come to a decision without first checking with Moscow is going to be difficult for some members to swallow,” said Derek Brower, a director at consultant RS Energy Group.

    “The market won’t care if tomorrow they manage a sizable cut with proper metrics, but that’s still a big if,” he said.

    Earlier yesterday, ministers were discussing a proposal to curb combined OPEC and non-OPEC output by about 1 million barrels a day, said a delegate. That was in line with Saudi Arabia’s preference for a moderate reduction that wouldn’t “shock the market.”

    The group is under pressure after a collapse in oil prices last month. Saudi Arabia, the largest producer in the cartel, is seeking to walk a fine line between preventing a surplus next year and appeasing President Donald Trump. Striking that balance got even trickier as the United States (U.S.) government data showed the shale boom turned the country into a net oil exporter last week for the first time in 75 years.

    The summit in Vienna was not the only story yesterday, as ministers sat down at the headquarters of the OPEC, Russian Energy Minister Alexander Novak flew to St. Petersburg to meet President Vladimir Putin to decide on their country’s contribution. If the group’s most important ally in the OPEC+ alliance decides to make a sizable cut, the cartel would follow up.

     

    Before the meeting, Al-Falih had said that “if everybody is not willing to join and contribute equally, we will wait until they are” and he was prepared for the consequences of failing to get a deal.

    Another sticking point in the talks was Iran’s contribution, said a delegate. Iran is currently subject to U.S. sanctions and as such won’t participate in any curbs, the country’s Oil Minister Bijan Zanganeh said. Other members said it should participate, said a delegate.

    OPEC ministers are also discussing whether to exempt Libya and Venezuela from making production cuts, another delegate said. Those countries, along with Nigeria, were opposed to cutting their own production, the delegate said.

    “Some countries will struggle because their economies are very constrained” and Nigeria itself could only manage a small cut, Nigeria’s oil minister, Emmanuel Kachikwu, said in a Bloomberg television interview before the meeting.

    OPEC is also contending with vociferous opposition from the U.S. president, who’s taken to using his Twitter account to berate the group’s policies and sees low oil prices as key to sustaining America’s economic growth.

  • OPEC sees lower demand for oil

    • Saudi cuts output

    The Organisation of Petroleum Exporting Countries (OPEC) yesterday forecast lower demand for its crude next year as rivals pump more. It said top oil exporter Saudi Arabia, is also eager to avoid a return of oversupply and had cut production.

    In its monthly report, OPEC said the world will need 32.05 million barrels per day (bpd) of crude from its 15 members this year, down 130,000 bpd from last month’s forecast.

    The drop in demand for OPEC crude means there will be less strain on other producers in making up for supply losses in Venezuela and Libya, and potentially in Iran as renewed United States (U.S.) sanctions kick in.

    Crude edged lower after the OPEC report was released, trading below $73 a barrel. Prices have slipped since topping $80 this year for the first time since 2014 on expectations of more supply after OPEC agreed to relax a supply-cutting deal and economic worries.

    OPEC in the report said concern about global trade tensions had weighed on crude prices in July, although it expected support for the market from refined products.

    “Healthy global economic developments and increased industrial activity should support the demand for distillate fuels in the coming months, leading to a further drawdown in diesel inventories,” it said.

    OPEC and a group of non-OPEC countries agreed on June 22-23 to return to 100 per cent compliance with oil output cuts that began in January 2017, after months of underproduction by Venezuela and others pushed adherence above 160 percent.

    In the report, OPEC said its oil output in July rose to 32.32 million bpd. Although higher than the 2019 demand forecast, this is up a mere 41,000 bpd from June as the Saudi cut offset increases elsewhere.

    In June, Saudi Arabia had pumped more as it heeded calls from the U.S. and other consumers to make up for shortfalls elsewhere and cool prices, and sources had said July output would be even higher.

    But the kingdom said last month it did not want an oversupplied market and it would not try to push oil into the market beyond customers’ needs.

    Rapid oil demand that helped OPEC balance the market is expected to moderate next year. OPEC expects world oil demand to grow by 1.43 million bpd, 20,000 bpd less than forecast last month, and a slowdown from 1.64 million bpd in 2018.

  • Oil hits 2016 high of 43 dollars per barrel

    Oil reached a 2016 high, hitting 43 dollars a barrel on Tuesday, and supported by hopes that upcoming meeting of oil producers will agree on steps to tackle a supply glut.

    The rise was also supported by a weak U.S. dollar and further signs of strong demand in China.

    Many members of Organisation of Petroleum Exporting Countries (OPEC) and outside producers like Russia are meeting in Doha, Qatar, on Sunday to discuss freezing output.

    The dollar fell to its lowest in nearly eight months against a basket of currencies, supporting commodities.

    Brent crude was up 50 cents at 43.33 dollars a barrel and had earlier in the session reached a 2016 high of 43.53 dollars per barrel.

    U.S. crude gained 39 cents to hit 40.75 dollars a barrel.

    “The weak dollar is one important reason,” said Eugen Weinberg of Commerzbank, adding “also, the fact that we are above 40 dollars and at multi-month highs is also contributing to the price increase as it is prompting some speculative buying”.

    Also supporting prices are rising vehicle sales in China, a further sign of strong gasoline demand and a plan by thousands of oil and gas workers in Kuwait to go on strike from Sunday.

    “If it is not clear that the strike will last long and will have any meaningful impact on exports or domestic production (including refineries), it does illustrate further the amount of pain that (Gulf) oil producers are also facing at current price levels,” said Olivier Jakob, analyst at Petromatrix.

    Oil prices have collapsed from above 100 dollars per barrel in mid-2014 due to over-supply.

    The OPEC decision in November, 2014 to abandon its traditional role of cutting output helped deepen the decline.

    Crude gained a boost last week after a surprise decline in U.S. inventories from a record high.

    But this week’s U.S. supply reports are expected to show an increase in stocks of 2.8 million barrels.

    Industry group, the American Petroleum Institute, is scheduled to release its report on Tuesday, while the government’s figures are due out on Wednesday.