Saudi Arabia’s Crown Prince, Mohammed bin Salman, had a telephone call with Nigeria’s President, Muhammadu Buhari on Monday to discuss further oil production cuts in a bid to improve the global crude markets, according to the Saudi News Agency.
The agency announced both countries talked on “ways of cooperation to enhance the stability “ of the Crude market.
The Saudi ruler usually calls other members of the oil cartel to negotiate and discuss OPEC issues.
OPEC+ wants to reduce global supply by 10% or 9.7 million barrels a day, however, Nigeria has been accused of not doing its part in production cuts.
GMD of NNPC, Mele Kyari promised on June 12 that Nigeria will commence production cuts in June and will achieve full compliance by July.
Exports show Nigeria is pumping 1.38 million barrels per day, however, Nigeria’s quota to meet its production cut is 1.37 million barrels per day.
Nigeria has ignored calls for OPEC production cuts in the past as the country enters an economic recessio0n which may be its worst in 40 years caused by weak global demand for its number one export, crude oil. IMF expects the Nigerians economy to decline by 5.4% in 2020, the World Bank forecasts 4.9 million Nigerians at risk of falling into poverty this year due to the falling economy.
Oil gains 15% in February, as Saudi Arabia’s output curbs help
Oil prices rose for a fourth straight month, despite its heavy plunge at the last trading session of the month.
Oil prices rose for a fourth straight month, despite their heavy plunge at the last trading session of the month.
British-based oil contract, Brent crude, which is the international benchmark for oil, settled at $64.42, down 3.7% on the day. For the week, it however rallied up by 2.5%. For the month, it was up 15%, extending gains in January, 9% in December, and 27% in November.
- Brent crude also hit a 13-month high of $66.81 in February. Oil traders will now be looking at the all-important meeting led by the Organization of Petroleum Exporting Countries with allies steered by Russia, which is to meet in the coming days to set output quotas for April.
- The Saudis had contributed massively in supporting crude oil prices last month when they pledged to make these extra curbs only this month and March, but some see signs that suggest a change in such status quo.
Saudi Arabia, the leading oil producer after the United States, is OPEC’s most important producer as it has proven reserves equivalent to 221.2 times its annual needs. This means that, without Net Exports, there would be about 221 years of oil left.
That said, OPEC has 70% of the world’s proved crude oil reserves. Venezuela leads the title for the highest crude oil reserves with 304 billion barrels, followed by Saudi Arabia with 298 billion barrels.
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, gave insightful macros that could weigh on oil prices in the short term.
“Stronger US dollar, especially against Asia EM and higher bond yields, lead to the selling of long-duration assets. And given the massive overweight of “long duration, infinite growth tech” at the index level, stocks are capitulating.
“And the domino effect is starting to hit commodities like oil triggered by a correction in the reflation trade due to higher US yields that are becoming a significant source of market volatility.
“Next week’s OPEC+ meeting has more potential to be damaging than a positive catalyst given the optimism now priced into oil and the likelihood the group takes steps that could prompt a round of profit-taking,” Innes stated.
What to expect
Still, oil traders anticipate such corrections are likely to be short-lived given evidence of an ongoing demand rebound and the likelihood that oil markets remain tight this year.
Gold posts worst monthly decline since 2016, as U.S dollar keeps rising
The precious metal posted its worst monthly decline since 2016 as gold prices broke below the $1,750 support.
Gold has of late been under immense pressure, as the Dollar Index surged to a one-week high of 90.8. The safe-haven currency is an outright alternative to gold and typically pressures gold when it gains.
The precious metal posted its worst monthly decline since 2016 as gold prices broke below the $1,750 support at the last trading session of the week, following most commodities and global stocks lower for a second straight day as global investors readjusted their portfolios.
With Friday being the last trading session for the month of February, it wrapped up the month with a 6.6% decline, its worst since a 7.2% decline in November 2016.
Gold for April delivery lost about 2.6% to settle at $1,728.80 per ounce. It earlier plunged to $1,715.05, its lowest point since a June 8 bottom of $1,700.10.
For the week, the precious metal contract lost about 2.7% in value, following through with the previous week’s drop of 2.5%.
Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, spoke on other prevailing macros weighing heavily on gold prices
“The rise in real yields has seen gold under pressure with everyone selling. Although positioning is cleaner, the overall market is still long, and ETF selling negatively affects the market on actual position clean out rather than just speculative sell-off. Which is more worryingly an early sign of a capitulation.”
Gold traders are not keen on going bullish, at least for the near term, on the bias that rising U.S Treasury yields see investors showing less interest in the yellow metal.
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