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PRAISE SINGERS  GO TO "GREET" NEW  GMD NNPC

PRAISE SINGERS GO TO "GREET" NEW GMD NNPC

04 August 2019

If journalism is to have meaning, to fulfill its raison d'etre, then it must be about speaking truth to power; giving a voice to the voiceless. The National Chairman of...

IS IT A NIGERIAN GAS FLARE COMMERCIALISATION PROGRAM ?

IS IT A NIGERIAN GAS FLARE COMMERCIALISATION PROGRAM ?

31 July 2019

The Nigeria Gas Flare Commercialisation Programme (NGFCP) is a prime example of a project well concieved but poorly executed and unlikely to achieve most of its objectives despite its inherernt...

VR CAPITAL BUY 25% OF P&ID AS NIGERIA FACE $9BN FINE

VR CAPITAL BUY 25% OF P&ID AS NIGERIA FACE $9BN FINE

05 June 2019

First, a health warning. This article is about recalcitrant, inept and quite possibly corrupt Nigerian politicians and government ministers. It is certainly about incompetence and misconduct in public office. It...

DISASTER AS UNEMPLOYMENT LEAPS BY 30%  TO 20.9m

DISASTER AS UNEMPLOYMENT LEAPS BY 30% TO 20.9m

29 May 2019

Nigeria is sleepwalking into a disaster which has the potential to unleash instability, insecurity and crippling hardship. Unemployment is always a cause for concern, it is the clearest indication that...

 NIGERIA NGIGE UNDEREMPLOYED OR UNEMPLOYABLE?

NIGERIA NGIGE UNDEREMPLOYED OR UNEMPLOYABLE?

08 May 2019

Working on the assumption that the Minister of Labour and Employment, Senator Chris Ngige has not been misquoted it is difficult to understand his recent pronouncement and what now seems...

NIGERIA ANOTHER MOU ANOTHER DAY

NIGERIA ANOTHER MOU ANOTHER DAY

01 May 2019

Nigeria has announced ambitious plans to double its oil production by 2025, targetting 4 million bpd in six years’ . Maikanti Baru, Group Managing Director at the Nigerian National Petroleum...

NNPC REFINERY WOES 2019

NNPC REFINERY WOES 2019

24 April 2019

The Nigerian Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has not unpredictably, stated that Nigeria’s continuous subsidy of petrol consumption means the Nigerian National Petroleum Corporation (NNPC) will...

NIGERIA OPEC STAND FIRM

NIGERIA OPEC STAND FIRM

28 March 2019

Nigeria and other member countries of the Organisation of Petroleum Exporting Countries (OPEC) as well as their non-OPEC allies led by the Russian Federation have said they are committed to...

PALM OIL PRODUCTION UNDERPERFORMS

PALM OIL PRODUCTION UNDERPERFORMS

18 March 2019

PALM OIL PRODUCTION A MEAGRE PERFORMANCE Nigeria from gaining a substantial share of the global oil palm industry now worth $62 billion annually, casting doubts on government’s ability to grow...

NIGERIA REFINING THE VISION

NIGERIA REFINING THE VISION

18 March 2019

NIGERIA REFINING THE VISION Nigeria is the only OPEC member country that imports gasoline (PMS) and holds the dubious distinction of being the largest importer in the world. The Nigerian...

IS THE PGB FATALLY FLAWED?

IS THE PGB FATALLY FLAWED?

18 March 2019

IS THE PIGB FATALLY FLAWED? Ten years after the Petroleum Industry Bill began its tortuous odyssey which has included the Bill being broken into four portions, both houses of the...

CBN PUMP UP THE T-BILLS

CBN PUMP UP THE T-BILLS

18 March 2019

CBN PUMP UP THE T-BILLS The Central Bank of Nigeria (CBN) plans to raise a total of N1.809 trillion from the debt market, in the first quarter of 2019.This is...

TIN EXPORTS NIGERIA

TIN EXPORTS NIGERIA

17 March 2019

TIN EXPORT NIGERIA Synterra are able to export high grade tin ore from Nigeria. We agregate the Mining production of a number of artisanal miners and consolidate volumes for exportSynterra...

BERYLLIUM MINING OPPORTUNITIES

BERYLLIUM MINING OPPORTUNITIES

17 March 2019

The Nigeria Solid Mineral and Mining Sector has in effect made the great leap forward which will now allow investors to take advantage of the vast mineral potential Nigeria possess....

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Tuesday, 02 July 2019 23:47

WHO NEEDS AN OPEC WHEN YOU CAN HAVE A PUTIN AND MBS

Written by
Putin MBS the new OPEC Putin MBS the new OPEC

In the end the only surprise was that it was Putin that announced its confirmation at the G-20 meeting in Osaka  last week. When questioned about the decision to extend OPEC+ cuts, he seemed to confirm the extension even before the meeting had even taken place, confirmation if any was needed that it is Putin and the Saudis that are now calling the shots. OPEC said it's decision was based in part on the fact that "economic bearishness is now increasingly prevalent" because of trade tensions, central bank policies and "geopolitical issues." Additionally, OPEC agreed in principle to formalise a charter for cooperation with non-member producers’ led by Russia despite objections from Iran, which insisted the 'charter' must be ratified by national governments. Not however according to OPEC Secretary General Mohammed Barkindo who is of the opinion that such a Charter will last for 'eternity'.

 OPEC may well have added the following to their statement ,that budgets and economic pressures in member countries mean that they need to maximise the barrel price not least in Saudi Arabia where it is thought a price of $84/b is required to balance their budget or in Nigeria, where the budget is premised on $65/b oil but they too need $85+ to meet the burden of debt repayments. OPEC does not need to have a particularly long memory to remember the disasterous price war with US shale in 2014  which saw the barrel price drop from over $100 to $30/b whilst wreaking havoc on the economies of OPEC member states. Nobody wants to countenance a repeat performance of that catastrophe.

 Cutting production in the face of weakening demand would make perfect sense if it did not provide increased market share for non OPEC+ producers. OPECs dwindling production now under 30 million barrels a day, has made way for Shale production growth. Cutting production seems to have created a market that shale can survive,    though I have my misgivings about shale's long term sustainability, especially against the backdrop of the Fed's anticipated policy of quantitative tightening.

 Meanwhile though the Iranians were not consulted and do not like  the fact that the decision making for the alliance now seems to be firmly a Riyadh-Moscow

prerogative, were on this occasion prepared to agree to extending the production cuts . Zanganeh the Iranian Oil Minister did  object to  Saudi Arabia and Russia

taking unilateral decisions for the group.

"I think the main issue OPEC has today is unilateralism,"  he went further to say  "OPEC needs to discuss with one another before decisions can be made. For one or two members to discuss outside OPEC and only bring the decision to OPEC for a final stamp of approval, this is the biggest threat to Opec at the moment".  Though he later soften his stance. He also confirmed that Iran had no intention of withdrawing from OPEC.  However he went on to voice Iranian concerns regarding quotas, "Even if

they extend for another three years, I have no problem," Zanganeh said. But cautioned that once US sanctions were removed, Iran would  not accept any constraints on its production.

The market had pretty much priced in an extension and so it was purely a matter of how long such an extension might be. Oil prices rallied on Monday in anticipationof the OPEC news and in response to the truce in the trade war between the United States and China. US oil prices finished the day 1.1% higher, giving back some

earlier gains. However Brent crude  futures fell today by $2.66, or 4.1%, to settle at $62.40 a barrel on with . U.S. West Texas Intermediate (WTI) crude  futures falling $2.84, or 4.8%, to settle at $56.25 a barrel, after touching their highest in more than five weeks on Monday.  Global oil demand growth for this year has fallen to 1.14 mbpd (million barrels per day) while non-OPEC supply is forecast to grow by 2.14 mbpd,” PVM analyst Tamas Varga wrote in a note. The major concerns around contracting economic growth and demand destruction have created a bear market that may require additional co-ordinated action from OPEC+

 

Putin yet again seems to have played a blinder. Though it must be acknowledged that he has been ably assisted in creating this new construct by an intransigent US

President that has put enormous pressure on Saudi Arabia to pump more oil at any cost.  US sanctions on Iran were responsible in part for sharp price increase in oil

prices in the first four months of this year. Oil prices have increased by over 20% since the beginning of the year. The loss of Iranian crude represents about 2.2 million bpd.

The Trump Administration has tasked both the Saudis and the U.A.E with pumping enough crude  to compensate for this loss and to meet Asia’s needs, but in particular Japan, South Korea, India and China.  The Saudis do have the spare capacity but have steadfastly continued to pump below their quota.  Saudi Oil Minister Khalid Al-Falih used a press conference on Monday night to say the kingdom was willing to keep cutting more deeply than its quota requires. Their objective is to drain the market of what it deems excess inventory and restore demand supply equilibrium.

 The Saudis clearly believe OPEC+ provides them a much better chance to counter US shale and withstand the unprecedented pressure the Trump Administration are subjecting them. OPEC and Russia are  unlikely bedfellows in what is a marraige of convenience.  Despite Zanganeh the Iranian Oil Ministers initial disquiet about how the decision to continue the production cut was reached,   by Monday evening  he had thrown his support behind the deal:

 “The meeting was good for Iran and we achieved what we wanted.”.

When asked if Putin was  now calling the shots the Saudi Energy Minister Khalid al-Falih responded “I don’t think Russia is calling the shots,”  when asked if Putin was now OPEC’s boss. he went on to say “I think Russia’s influence is welcome.” In a very rare show of unity Iran’s  OPEC governor Hossein Kazempour Ardebili concurred, echoing his boss Zanganeh’s conciliatory tone. Given the chorus of approval coming from OPEC member states it would appear for all intents the distrust and antipathy that had once characterised the relationship between the two parties is well and truly dissipated.

None of this will please President Donald Trump, who has repeatedly called for OPEC to pump more oil to keep US gas  cheap. Importantly there are potential political ramifications for  the 'special relationship' that currently exist between the US and Saudi Arabia. At a time when the US Congress have blocked arms sales to the Saudis. Russia seem to be fostering a much better, closer and  influential relationship with Riyadh. The collaboration could lend Saudi Arabia a non judgemental alternative to the US ,  it will crucially also bolsters Putin's clout in the Middle East. The Iranians seem to be singing a slightly different song and it is highly likely they too will reach out to the Russians

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