Connect with us
nairametrics
UBA ads

Commodities

Nigeria’s Black Gold under pressure, stays on $40

To tackle weakened oil demand, OPEC and its major allies agreed to a record supply cut.

Published

on

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 plunged on Thursday, keeping the bearish momentum. It has expanded losses of more than 5% recorded in the last trading session, triggered by record-high U.S. crude inventories and the resurgence of COVID-19 cases, which intensified oil traders’ concerns that oil demand might plummet.

Brent crude lost about 0.7%, to trade on key support levels at $40 per barrel, after losing more than 5% on Wednesday.

UBA ADS

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

READ MORE: Afreximbank re-appoints Nigeria’s Benedict Oramah as president, disburses $30b in 4 years

These are all important oil demand centers. A second wave of infections and lockdowns will derail the global economic recovery and with it, oil demand and prices,” said Stephen Brennock of broker PVM.

GTBank 728 x 90

Yesterday’s selloff came after American government data showed crude inventories skyrocket by 1.4 million barrels, driving crude oil inventories to a record high for a third straight week.

READ ALSO: U.S dollar gains ground, U.S. President Trump boosts investors’ Optimism

“The thing I was most concerned about was the rebound in domestic production and it was up – as a standalone it was capable of doing some damage to the market,” Bob Yawger, director of energy futures at Mizuho said to CNBC.

onebank728 x 90

However, to tackle weakened oil demand, OPEC and its major allies agreed to a record supply cut that started last month. Nigeria and other major oil-producing countries pledged to produce less crude oil, in order to support crude oil prices. OPEC said these cuts were already serving its purpose.

Download the Nairametrics News App

“The oil market was strongly supported by a reduction of the global crude oil surplus, thanks mainly to the historic voluntary production adjustment agreement,” OPEC said, adding that it saw a “gradual recovery” in demand until the end of the year.

app
GTBank 728 x 90

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]

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.

Commodities

Cocoa prices melt lower as COVID-19 weakens demand 

The worsening wave of cases in major global economies strengthened concerns among cocoa traders. 

Published

on

Top 10 Agricultural Products Export from Nigeria, Nigeria’s cocoa exports to fall by $100m as prices rise in futures market., Africa May Lose $4.8 Billion in Crop Exports Due To Coronavirus

Cocoa futures prices are melting lower as the resurgence of COVID-19 around the world threatens global demand for chocolate (Cocoa substrate). 

At the last trading session, September Cocoa futures closed at $2,164.50.  

UBA ADS

As a result of weakening demand globally for cocoa and its substrates coupled with the present cocoa glut, as supplies outweigh demand, the price of September cocoa futures dropped to $2,159 per 1000kg, nearing a one-year low, before stabilizing above its support levels.  

Globally chocolate is often classified as a luxury item, meaning, in times of high economic uncertainty like this, the consumption of such products will falter, as consumers focus more on necessity goods.  

READ ALSO: Nigeria leads Africa combined in Q2 2020 on BTC P2P

GTBank 728 x 90

The worsening wave of cases in major global economies strengthened concerns among cocoa traders. 

However, Nigeria’s leader remains optimistic recently that efforts made by fiscal stakeholders in that sector, seems to be bearing fruit, as Nigeria recorded a surge in revenue in Cocoa, year to year.  

President Muhammadu Buhari said Nigeria’s revenue from cocoa and sesame seeds has increased by $79.4 million and $153 million respectively in the past year. 

onebank728 x 90

“Our efforts on growing non-oil exports have started to yield some results. For instance, in the past year, our revenue from cocoa and sesame seed increased by $79.4 million and $153 million,” he said. 

READ ALSO: Nigeria and US Authorities battle former Enron Nigerian Subsidiary over $80 million Yacht

Nigeria plays a leading role in the cocoa industry, covering a 6.5% share of the global production of cocoa. 

app
GTBank 728 x 90

Nigeria is also the fourth largest exporter of cocoa beans globally, behind Côte d’Ivoire, Ghana, and Indonesia, according to the National Export Promotion Council. Cocoa exports in Nigeria are projected to grow annually by 4% in the coming years. 

Download the Nairametrics News App

These export earnings from cocoa, if invested properly, could further help Nigeria reduce its reliance on crude oil, which makes up a large chunk of its export earnings (about 90% Est), and minimize the impact of oil price swings to its economy. 

Patricia
Continue Reading

Commodities

Nigerian crude grades yet to rally because of U.S Shale

Bonny light sold for $43.33, far below the price Nigeria sold its crude months ago.

Published

on

U.S Shale, Naira under pressure, as crude oil hits $25 per barrel, Oil Price: A dead cat bounce in the making?, Bears tear Crude oil futures into shreds as Brent slumps more than 20%

Crude oil prices for lighter Nigerian grades have not experienced the rally its category is presently having, despite significant draws on stockpiles in Europe, as cheaper substitutes like U.S Shale continue to be more attractive to importers, according to a report released by Reuters.

Bonny light, according to oilprice.com, sold for $43.33, far below the price Nigeria sold its crude months ago, at a discounted rate to attract buyers. However, consistent Indian buying continued to buoy Nigerian differentials, especially for some medium grades.

UBA ADS

READ MORE: Investors gain N15.58 billion amidst sell-offs in Nigerian bank stocks 

Quick fact: Brent crude is the leading global benchmark for Atlantic basin crude oils. The international benchmark is used to set the price of crude oil of about of two-thirds of the world’s traded crude oil, including Nigeria’s crude.
Africa’s largest producer of crude oil and gas, Nigeria, gets most of its oil from the Niger Delta area, and its relatively classified under two specification based on its lightness and gravity, the heavier grade with a specification of, 20–25 gravity. The lighter grade with a specification of 36 gravity and both Nigerian grade types are low in sulfur and paraffinic.

Examples of Nigerian grades include Bonny light, Brass River and Qua Iboe.

GTBank 728 x 90

Recall that three months ago the price of Bonny Light, one of Nigeria’s crude grades, had dropped to about $12–$13 a barrel because the major market for Nigerian Crude, had experienced economic depression triggered by the COVID-19 pandemic.

READ MORE: Nigeria’s crude export could suffer because of ExxonMobil

Also, it went so bad that even with lower oil prices, long-haul buyers from Asia did not want Nigerian oil cargoes because of shipping costs to pay and no real need for the oil barrels since demand has plunged.

onebank728 x 90

Patricia
Continue Reading

Commodities

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

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

Published

on

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.

UBA ADS

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:

GTBank 728 x 90

“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 

onebank728 x 90

“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.

app
GTBank 728 x 90

Download the Nairametrics News App

“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
Continue Reading