NIGERIA: THE CRUDE OIL ECONOMY
NIGERIA SUPPORT SAUDI CUTS 11/03/19
President Muhammadu Buhari, has assured Ahmad Qattan, Special Envoy of King Salman Bin Abdulazi that Nigeria would comply with the Organisation of Petroleum Exporting Countries (OPEC) production quotas to boost crude oil prices through reduction of oil output. The Special Envoy called for greater adherence to production cuts by Nigeria andhoped that he would take a positive message back home. President Buhari said as a responsible member of the OPEC, Nigeria was willing to go along with the Saudi initiative in limiting output so that prices would go up. He further saidoutput cuts have always been difficult for Nigeria considering the country’s peculiar circumstances of large population,
GASOLINE IMPORT BURDEN
The Nigerian National Petroleum Corporation (NNPC) between November 2017 and November 2018 imported 19,437,894,096.66 billion litres of refined petroleum products . Nigeria have devised a scheme called the Direct Sales Direct Purchase (DSDP) programme in which it exports the crude oil meant for domestic refining to offshore Refiners. They in turn supply NNPC through the approved local trader with refined products of equivalent value.
IS OIL POISED FOR A BREAKOUT?
Against the backdrop of US-China trade negotiations both WTI and Brent saw the highest price finish for a front-month contract since Nov. 19, according to Dow Jones Market Data. Week to date, WTI prices were 5.4% higher, while Brent jumped by 6.7%. Brent crude on Friday topped $66 a barrel for the first time this year, hitting a roughly three-month closing high at $66.25 and rising 6.7 percent this week. Meanwhile, U.S. West Texas Intermediate crude approached $56 on Friday, settling 2.2 percent higher at $55.59 a barrel, the best closing prices since Nov. 19. OPEC earlier in the week reported its crude output had fallen by nearly 800,000 barrels a day in January to average 30.81 million barrels a day, with most of the cuts coming from Saudi Arabia. The International Energy Agency’s monthly oil market report, also released this week, reported the Saudis had cut production by 400,000 barrels a day last month, to average 10.24 million barrels a day. Saudi Arabia, pledged earlier this week to cut output further in the coming months, citing oil minister Khalid al-Falih, who said the country would cut an additional 500,000 barrels a day to take production to 9.8 million barrels a day in March.
TIME TO HEDGE OIL PRODUCTION
Following the longest consistent bear market and losing streak since 1984 the Dated Brent benchmark plummeted from a height of $86.74 per barrel in early October a 4 year high to $60.21 per barrel a lost of 30% of its value or just under $25 a barrel . Unlike many experts who predicted a bull market that would see the Dated Brent break the $100 barrier, this analyst rightly predicted the intervention of US foreign policy and the newest element of fundamental analysis of the oil markets, "The Trump Tweet". Market Analysts and traders have had to contend with imponderable inventory reports emanating from the EIA jolting the market with unexpected inventory builds.
NIGERIA’S OPEC DILEMNA
Oil prices plunged by more than 4 percent on Monday, and the selloff continued in early trading on Tuesday, pushing WTI down below $48 per barrel amid reports of rising U.S. oil inventories at a time when global equities were sharply down. Oil prices dropped 4 percent, weakening for a third consecutive session as reports of swelling inventories and forecasts of record U.S. and Russian output. U.S. crude oil dropped $2.04, or 4.1 percent, to a low of $47.84, its weakest since September 2017, before recovering to around $48.53. Brent crude lost $2.41, or 4.0 percent, to a 14-month low of $57.20.
US PONDER NOPEC
nevitably aided and abetted by increases in oil prices and a US President who has been a long term critic of OPEC, the No Oil Producing Exporting Cartels (“NOPEC”) Act has re emerged . The act seeks to hold OPEC member states liablefor violations of U.S. antitrust legislation by removing their sovereign immunity shield for what is deemed as OPEC’s collusive behaviour in its attempts to limit global crude oil production to manipulate price outcomes. The NOPEC bill is a re-incarnation of legislative attempts that have variously been abortively introduced over 15 times since 1999. he NOPEC bill passed by the House Judiciary Committee last month could go to the floor this summer for a full vote. A different bill in the Senate also seeks to rein in OPEC by opening the door to complaints at the World Trade Organization if OPEC continues to pursue its policy of production cuts as a means to support oil prices.
West African crude differentials were finding support from solid demand, traders said on Monday, while newly issued buying tenders were in focus. April loading programmes were continuing to clear and around 20 remain. Exxon has sold some April-loading Qua Iboe, a trader said. Qua Iboe for April was offered at dated...
The narrowing spread between Northwest European diesel and gasoline cracks had helped support some Nigerian crude grades which have suffered from a lack of European demand, traders said.
The ARA front-month diesel crack was assessed at $14.54/b Monday, with the benchmark ARA front-month EBOB gasoline crack at $9.45/b. The spread between the two was $5.09/b, slightly wider than $4.53/b Friday — the narrowest differential since August 2018.
The recent narrowing of the spread has come on the back of stronger gasoline values, which have led to some Nigerian grades not falling below a certain price threshold. The gasoline strength is boosting demand for the country’s lighter sweeter crudes which are rich in the product.