Connect with us
nairametrics
UBA ads

Energy

4 key reasons why Brent crude might slip back to $35 per barrel

Despite the output cuts from OPEC+ and curtailments in North America, crude oil prices may be short-lived as Brent crude could slip back

Published

on

Crude oil prices, bonny light, 4 key reasons why Brent crude might slip back to $35 per barrel, Crude oil prices resume weekly gains as demand picks up 

The rebound in crude oil prices may be short-lived, as the oil market fundamentals appear to be turning bearish once again, with the likelihood of Brent crude slipping back to $35 per barrel in the short term, over uncertainty in demand recovery and returning production from the United States and Libya.

Despite the recent optimism that output cuts from OPEC+ and curtailments in North America will combine with demand recovery, Goldman Sachs warns that there are four key reasons why oil prices might drop in the coming weeks.

UBA ADS

READ ALSO: Who will ruin the OPEC+ party?

In early May, Goldman Sachs had predicted that oil demand could rebound enough to exceed supply by the end of May. However, now the consumption forecasts appear ambitious and the demand recovery is expected to be slow and still highly uncertain in the short term, especially due to low returns from refining.

The other 3 key reasons for a predicted halt in oil rebound are the resumption of production by US shale and Libya, prices closing in on levels where Chinese opportunistic oil purchase would slow, and a still massive 1 billion barrel of crude outstanding in global oil inventories.

GTBank 728 x 90

READ MORE: Saudi Arabia and Russia agree to extend output cuts, but there’s a condition

Libya has confirmed its plans to export crude produced at two of its largest oilfields again, after production had been halted for almost 6 months as the North African country’s output, which was negatively impacted by conflicts, was getting back to revival.

global oil market, Bonny Light and Brent crude oil, Arthur Eze, Nigeria cuts crude oil production to 1.77mbpd, Nigeria wants international oil companies to pay up now , OPEC+ deal gets a boost as Russia and Saudi Arabia consider further output cut, 4 key reasons why Brent crude might slip back to $35 per barrel

Crude oil

onebank728 x 90

READ ALSO: Global oil market to re-balance in 2 months’ time

Also, some US shale producers are bringing back shut-in production this month. The US inventory could again be influential this week, with shale producers coming back.

Goldman Sachs said that with OPEC’s latest output cut already overpriced, the forecast is that there will be reduction in prices in coming weeks with the short term forecast for Brent crude at $35 per barrel as against the spot prices of $43 per barrel. Despite the oil price surge in May, the poor refining margins and the recent sharp decline in US crude bases have given rise to bearish outlook.

app
GTBank 728 x 90

Morgan Stanley warned that oil prices might have risen too fast too soon, as the market was focused on supply cuts in order to deal with the oil glut. They said that the global oil demand may not return to pre-COVID-19 levels before the end of 2021.

 

Patricia

Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

Click to comment

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Energy

NNPC quells fears over leaking Lagos pipeline

The Corporation says it was on the last stage of completing repairs which includes hydro testing.

Published

on

NNPC, Domestic Crude Allocation, Why NNPC’s Duke Oil is quitting London operations for Dubai , NNPC divests stake in four oil wells to NPDC , How NNPC discovered oil, gas deposits in the North , Nigeria to leverage on condensate refineries to be petrol net exporter, How NNPC saved $3 billion from arbitration , NNPC, IPPG donate medical supplies to South West state governments, NNPC discloses bases for employment and managerial progression in the oil firm, NNPC diversifies into housing, power; plans to beat crude production cost to $10 per barrel

The Nigerian National Petroleum Corporation (NNPC) urged Nigerians to ignore reports of a possible fire outbreak from a vandalized pipeline at Aboru Canal in Alimosho Local Government Area of Lagos state. 

“There is no such hazard as the line in question has since been shut down for repairs and presently contains only water,” NNPC said. 

UBA ADS

READ ALSO: Abule-Ado explosion: Lagos State Government presents cheques to survivors

NNPC said that the Atlas Cove-Mosimi stretch of the system 2B pipeline was shut down on June 25, 2020, to enable the comprehensive maintenance of some segment of the pipeline. 

GTBank 728 x 90

READ MORE: NNPC states why it failed to fix refineries, to build 200,000 capacity refinery

The Corporation says it was on the last stage of completing repairs which includes hydro testing (a process of pumping water through the entire pipeline to leak detection and for integrity tests). 

Revealing that they stopped pumping water 9:27 am Thursday morning to enable necessary repairs after patrol team made a report about leakage at a point in the Aboru Canal. 

onebank728 x 90

Download the Nairametrics News App

NNPC urges residents of the community to remain calm “as there is no possibility of a fire erupting from the leakage point”. 

app
GTBank 728 x 90
Patricia
Continue Reading

Energy

Nigerian LNG to increase exports, returns profits despite weak gas prices 

The gas firm has been able to sell the excess supply at a discount in the spot market. 

Published

on

Nigeria will most likely increase the export of its Liquefied Natural Gas (LNG) in August and September to the global market if the demand of the commodity goes up despite the crash in prices which is near record lows. 

However, in the meantime, the government-owned Nigeria Liquefied Natural Gas (NLNG) company has concluded plans to maintain its current supply level to the global market. This is contrary to what some other exporters like the United States and Australia seem to be doing following low prices. 

UBA ADS

According to a report from Bloomberg, Nigeria exported over 1.8 million tons in the month of June, which is more than last year’s monthly average of 1.7 million tons. 

Some of the country’s buyers have effected clauses in their long-term which allows them to take fewer shipments than was originally agreed. The gas firm has been able to sell the excess supply at a discount in the spot market. Over 50% of Nigeria’s exports in May were sold in Asia as against the about 30% that was sold last year. 

Natural gas exports have slowed in June as the coronavirus pandemic has negatively affected global demand. Most of the multibillion-dollar projects in natural gas export terminals have been either halted or delayed as a result of the disruptions by the pandemic. 

GTBank 728 x 90

The damage to the gas trade goes well beyond the Middle East as it is affecting similar businesses in Australia, which is reputed to be the world’s largest exporter of LNG and the United States. With the global exports down by 6.3% from the previous year, only a few exporting countries like Qatar and Algeria, have been able to increase output. 

The positive for Nigeria is that the production cost at its LNG facility in Bonny island is so low that it can still turn a profit despite the weak spot prices. The facility has been about the lowest costs when compared to similar projects around the world. 

Nairametrics had reported that the NLNG just signed the engineering, procurement and construction contract for its train 7 project, which is a major gas expansion plan. The project is expected to boost the country’s LNG output by more than 30%. 

onebank728 x 90

The NLNG is a consortium between the Nigerian National Petroleum Corporation (NNPC), Royal Dutch Shell, Total and Eni. The project is coming at a difficult time when LNG prices in Asia and gas prices in Europe have hit a record low due to the coronavirus pandemic which has weakened demand.   

Patricia
Continue Reading

Energy

Update: FG increases fuel price to N143.80 per litre

This was disclosed by Petroleum Products Pricing Regulatory Agency (PPPRA) in a circular.

Published

on

The Federal Government has announced an increase in the new pump price of Premium Motor Spirit, otherwise known as Petrol, to N143.80 per litre.

According to a monitored report, this was disclosed by Executive Secretary of Petroleum Products Pricing Regulatory Agency (PPPRA), Abdulkadir Saidu, in a circular dated Wednesday, July 1, 2020, to oil marketers,

UBA ADS

The statement from the circular says, ‘’After a review of the prevailing market fundamentals in the month of June and considering marketers’ realistic operating costs, as much as practicable, we wish to advise a new PMS pump price band of N140.80-N143.80 per litre for the month of July 2020.’’

‘’All marketers are advised to operate within the indicative prices by the PPPRA.’’

READ ALSO: Nigerian Treasury Bills plunge to 3.39% per annum

GTBank 728 x 90

He also pointed out that the ex-depot for collection include the statutory charges of bridging fund, maritime transport average, National Transport Allowance and administrative charges.

The federal government had a few months ago announced its plans to stop the subsidy payment regime as they said that the downstream sector of the oil industry will be fully deregulated. The government said that the prices of all petroleum products which includes fuel would be fully determined by market forces, following the removal of the existing cap on fuel prices.

READ ALSO: Subsidy economics

onebank728 x 90

PPPRA had stated that it arrived at the new price regime after taking into consideration the operating costs of the oil marketers.

It can be recalled that at the beginning of the month of June, there was a minor adjustment of fuel price as it was fixed at N121.50 per litre from N123.50 per litre in May. The new price in July represents an over N20 per litre increase when compared to the price last month.

app
GTBank 728 x 90
Patricia
Continue Reading