Oil early fall and decline, Joe Biden’s call to OPEC+, Nicola Sturgeon wake-up call on Climate Change, Nigeria and others plan to increase capacity, shrinking U.S inventories, and NNPC trading surplus. Here’s what’s happened in the oil markets.
Oil early fall and decline
Last week, we witnessed Oil prices decline and recover a bit last week. The reason for this fall was attributed to the US dollar strengthening and newly imposed restrictions to contain the rise of Covid-19 cases in Asia. Brent crude traded around the $69 range, a far cry from the $70.70 per barrel. Asian demand seems to drop as Asian refiners have reduced their oil imports. Traders should look out for the situation there as we generally know that Asian demand is an essential indicator for the direction of oil prices.
Joe Biden’s call to OPEC+
U.S. President Joe Biden’s administration on Wednesday, the 11th of August urged OPEC and its allies to boost oil output to tackle rising gasoline prices that they see as a threat to the global economic recovery. It appears the request reflects the White House’s willingness to engage major world oil producers for more supply to help industry and consumers, even as it seeks the mantle of global leadership in the fight against climate change and discourages drilling at home. The request was taken aback by some US stakeholders in the oil industry. They believe it is hypocritical to cancel drilling projects in the US and now call other nations to increase oil production. The reality is that Joe Biden is interested in inflation and the consumer price index which gasoline prices are a component of.
Nicola Sturgeon wake-up call on Climate Change
In another fight for Climate change, Scotland’s First Minister, Nicola Sturgeon has requested that Prime Minister, Boris Johnson should review Oil and Gas licenses in the United Kingdom. She acknowledges that Oil & Gas supports thousands of jobs in Scotland, however, climate change is a priority and justifies its transition. After the “code-red” report, the First Minister believes the government cannot ignore the concern that drilling for new oil is not compatible with protecting the planet. The government’s responsibility to tackle climate change must govern the approach to any new license applications and the Scottish Minister is requesting a review of licenses.
Nicola Sturgeon also called for a UK 4 nations summit ahead of COP26 to ensure that we are all living up to the government’s responsibilities.
Despite recommendations from the IEA, a lot of countries are very keen on increasing their oil reserves. Hopefully, oil demand better increases as the core OPEC countries are planning large capacity increases (Nigeria, KSA, UAE, Iraq). The Nigerian Federal Government is planning to increase its oil reserves by 40 billion barrels and gas reserves to 220TCF by 2030 while the government is targeting to increase oil production capacity to three million barrels per day.
The Iraq minister spoke about his plans to increase oil production to 8 million BPD by 2027.
Shrinking U.S inventories
U.S. inventories of crude oil declined slightly last week as refinery activity increased, according to data released by the Energy Information Administration. Benchmark U.S. oil prices that were lower before the report came out remained so afterwards. The Nymex front-month crude contract for September delivery was recently down 1% at $67.63 a barrel.
Crude-oil stockpiles fell by 448,000 barrels to 438.8 million barrels, and remain about 6% below the five-year average, the EIA said. Oil stored at Cushing, the delivery point for U.S. stocks, fell by 325,000 barrels from the previous week to 34.6 million barrels according to the EIA.
U.S. crude-oil production rose by 100,000 barrels a day from the previous week to 11.3 million barrels a day, according to the EIA. The fall in US commercial crude oil inventories halted the downward trend for prices, signaling recovering demand. Inventories dropped 0.1% for the week ending August 6.
Any development in Nigeria?
NNPC released a report based on transactions in April. Interestingly, The Nigerian National Petroleum Corporation (NNPC) says its trading surplus increased by 23.64% to N43.57 billion in April 2021 from the N35.24 billion recorded in March.
The report also shows that NNPC’s operating revenue surged by 17.73% (N80.67 billion) to N535.61 billion in April; while its expenditure also rose to N492.05 billion in the same month.
