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Commodities

Nigeria’s Bonny light reaches four months high

Bonny light crude reached a four-month high, since early March 9, where its price fell to $37.22. 

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Crude oil prices rebound ease investors’ concerns for Nigeria debt market, How substantial is compliance for the Oil market?

Data obtained from oilprice.com confirms that Nigeria’s flagship crude closed at $41.80 on June 19, reaching a four-month high, since early March 9, where its price fell to $37.22. This surge was triggered by oil production cut and growing oil demand for Nigeria’s black gold.

“You’re going to see more OPEC compliance,” Phil Flynn, senior oil analyst at Price Futures Group in Chicago told Reuters. “I think we’d be a lot higher if it weren’t for these coronavirus fears.”

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With OPEC+ compliance, presently at about 87% for May, member countries are taking measures to reduce oil glut and boost compliance. 

What you should know about Bonny light? Bonny Light crude is a high-grade level of Nigerian crude oil with specific gravity, produced in the Niger-Delta area of Nigeria and named after region city where it’s found.

Bonny light is low sulfur content and much lighter than other crude oil grades making it very attractive to oil buyers because they are termed to have the highest quality

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READ MORE: Brent Crude falls, U.S Crude Oil Inventories record a two week high

Crude oil has doubled in value since a 21-year low in April, boosted by record OPEC+ supply cuts of 9.7 million barrels per day, about 10% of world demand for oil.

Crude oil continued to rally as an unusual catalyst from OPEC and its major allies complied with the production cut agreement, though some oil traders and experts warned that the bullish momentum might run out of steam.

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“There is enthusiasm in the market that oil supply is still under control,” said Paola Rodriguez Masiu, analyst at Rystad Energy. “A positive OPEC+ meeting does that and Thursday’s session helped renew confidence.” 

 

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Patricia

Olumide Adesina a French-born Nigerian, an Investment Professional at Nairametrics Financial Advocates, owners of Nairametrics.com. He is a Certified Investment Trader, with more than a decade working expertise in Investment Trading. A member of the Chartered Financial Analyst Society. Financial Market; Yale University, Behavioral Finance; Duke University. You can follow Olumide on twitter @tokunboadesina or email [email protected]

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Commodities

Crude oil prices fall over lingering concerns on world’s largest consumer

Both International benchmarks for crude gained more than 2% yesterday.

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Oil prices gain likely to halt over demand uncertainty as US-China tension intensifies

Crude oil prices plummeted on Friday morning as the resurgence of COVID-19 picked up globally, especially in the world’s largest economy and consumer of crude oil (United States), dampened the optimism for strong demand in energy goods.

Brent crude futures lost 0.70% to trade at $42.84 a barrel at 4.30 am Nigerian local time, and the West Texas Intermediate also dropped 0.8%, to trade at $40.31 a barrel.

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Quick fact: Both International benchmarks for crude oil gained more than 2% yesterday, triggered by positive macros coming from the U.S Job report and falling U.S. crude inventories. For the week, Brent crude is up 4.3% and WTI is up 5.6%.

READ ALSO: Shell warns investors it may write down up to $22 billion due to oil crash

Stephen Innes, Chief Global Market Strategist at AxiCorp, in a note to Nairametrics, explained in detail the lingering concerns about the world’s largest consumer of crude oil. He said:

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“The demand concerns continue to linger amid a rise in gasoline stockpiles as the number of confirmed coronavirus cases in the US climbed to an all-time high of more than 50,000 on Thursday.

“And as significantly, the infection curve rose in 40 out of 50 states in a reversal that has mostly spared only the Northeast. Indeed, faltering re-opening of US States as Covid-19 cases rise remains the primary thorn in the oil bulls’ side.

READ MORE: Nigeria’s external reserve drop by $261 million in 15 days, oil firms to sell forex to CBN 

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“But worrisome for oil prices are the densely populated southern US states that have been ravaged by the virus and are among the US’s most weighty consumers of gasoline.

“With the latest state government health advisory imploring Sun Belt citizens to restrict movements coupled with the re-imposition of localised lockdowns, there is a detectible level of uncertainty in the oil market heading into what is traditionally one of the busiest driving weekend of the year, the July 4th celebration weekend.”

However, some oil traders and investors remain optimistic that the price of crude will maintain its bullish momentum in the midterm, as long as certain parameters are kept in place.

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“The market has become increasingly confident that easing restrictions on travel and business would boost demand for crude oil, but the pandemic’s progress threatens to derail this recovery,” ANZ Research said in a note.

“The recovery in gasoline demand will plateau until the U.S. economy improves,” it concluded.

Patricia
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Commodities

OPEC production output now at lowest level in nearly 30 years 

Production cuts from OPEC countries and other allies have helped to revive the price of Brent Crude.

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OPEC+ Alliance, US, Russia, Canada, Mexico reach historic deal to cut 13.4 million bpd, Oil market still uncertain over the OPEC+ deal as prices react positively, 7 oil producing countries most affected by covid-19, see where Nigeria is placed

The production output of the Organisation of Petroleum Exporting Countries (OPEC) member-countries has recorded its lowest level in nearly 30 yearsdue to production cuts after demand was heavily impacted by the COVID-19 pandemic. The last time oil production was cut to 22 million barrels a day was during the Gulf War in 1991. 

Last month, OPEC cut production to 22.69 million barrels per day, in an effort to strengthen global prices for the commodity which was struggling with weak demand during a global lockdown occasioned by the pandemic. 

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READ MORE: Largest private investment in Africa begins $15 billion financing

OPEC leader, Saudi Arabia, has been compliant in its production cuts through the month of June. Back home, Nigeria has promised to do its parts in implementing total compliance with the cuts. 

Production cuts from OPEC countries and other allies such as Russia (OPEC+) have helped to revive the price of Brent Crude to over $40 since May, compared to record lows in the month of April. 

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While the Gulf nations have implemented further cuts, Nigeria, Angola and Iraq are still lagging in full compliance, meeting only 77%, 83%, and 70% (respectively) of their quotas. Saudi Arabia reduced production by 1.13 million barrels to 7.53 million a day in June. 

READ ALSO: Brent crude surges past $40, analyst recommends investment in crude oil derivatives

Other members like Venezuela pumped only 340,000 barrels a day in June, even though they are exempted from cuts as the country is dealing with a series of issues from US sanctions to a severe economic recession. 

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Meanwhile, Russia hit its target quota for the second month in a row as countries outside the OPEC also cut production due to falling demand impacted by the COVID-19 pandemic. 

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Commodities

Sharp drop in oil stockpiles boost Brent Crude  

Brent crude is the leading global benchmark for Atlantic basin crude oil.

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Brent crude drops to $25, oil demand drops by about 10% of world’s consumption, Brent Crude Oil hits $26, as Nigeria's Sweet Crude demand falls, Oil price pushes up before OPEC meeting, Asian equity markets mixed, NIGERIA OIL: Darker days ahead as Brent falls below production cost, Brent crude drops, as oil traders focus on OPEC+ meeting

Brent Crude prices gained on Thursday’s early trading session, reversing previous losses recorded at Asia’s trading session. This was propelled by a sharp drop in oil stockpiles outweighing concerns that a spike in U.S. coronavirus infections and revived lockdown measures in California could stall recovery in fuel demand. 

Brent crude (LCOc1) gained 0.57% to trade at $42.27 a barrel 10.37 am local time, after gaining 1.8% yesterday. 

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Brent crude is the leading global benchmark for Atlantic basin crude oil. The international benchmark is used to set the price of crude oil of about two-thirds of the world’s traded crude oil including that of Nigeria. 

READ MORE: Nigeria’s external reserve drop by $261 million in 15 days, oil firms to sell forex to CBN 

Chief Global Market Strategist at AxiCorp, Stephen Innes, spoke about the ultimatum the Saudis are giving other producers towards stabilizing crude oil price. He explained that “The price falls were further compounded by warnings from Saudi Energy Minister Prince Abdulaziz who, in no uncertain term, issued a stern ultimatum to OPEC+ laggards to comply with the cartel’s recent production agreement or face a price war. The Kingdom is not going to do the bulk of the heavy lifting while other member states are not 100% compliant.” 

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Jeffrey Halley of OANDO in a note to Reuters also explained that, “The drop in stockpiles, reports of oil moving out of floating storage, and strong manufacturing PMI data across the globe formed a constructive case for oil prices rising.” 

READ MORE: Global stocks become blockbusters, optimism rises for COVID-19 cure

“The overnight price action and EIA data have temporarily lifted the COVID-19 gloom that has capped oil prices all week,” he added. 

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Patricia
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