Nigeria Set for Higher Revenues As Oil Hits 2-Year High At $69/b

Whatapp News

By Nse Anthony-Uko
(Sundiata Post) – Price of crude oil has climbed to its highest level in the last two years, with Brent crude hitting above $69 per barrel.
As of Wednesday, the oil price touched $69.26 per barrel, the highest since June, 2015.
The latest rally has been due to the production cuts imposed by the Organisation of the Petroleum Exporting Countries (OPEC) and decline in oil inventories.

While major oil producing countries like Nigeria appreciates this trend in view of rising revenue potentials, analysts are quick to caution that markets may be overheating.

A broad global market rally, including stocks, has also been fuelling investment into crude oil futures.
US West Texas Intermediate, WTI, crude futures were at $63.40 a barrel Up by 44 cents, or 0.7 per cent, above their last settlement. They marked a December-2014 high of $63.53 a barrel in early trading.
Brent crude futures were at $69.15 a barrel, 33 cents, or 0.5 per cent, above their last close. Brent touched $69.29 in late Tuesday trading, its strongest since an intra-day spike in May 2015 and, before that, in December 2014.

“The extension of the OPEC agreement and declining inventories are all helping to drive the price higher,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities. In an effort to prop up prices, OPEC, together with Russia and a group of other producers last November extended an output cut deal that was due to expire in March this year to cover all of 2018.

The cuts, which have mostly targeted Europe and North America, was aimed at reducing a global supply overhang that had dogged oil markets since 2014. The American Petroleum Institute said late on Tuesday that crude inventories fell by 11.2 million barrels in the week to Jan. 5, to 416.6 million barrels.
Amid the general bull-run, which has pushed up crude prices by more than 13 per cent since early December, there are indicators of an overheated market. In the United States, crude oil production is expected to break through 10 million barrels per day (bpd) this month, reaching levels only Russia and Saudi Arabia have.
In Asia, the world’s biggest oil consumer region, refiners are suffering from high prices and ample fuel supplies. “One area of concern, particularly in Asia, is that of (low) refining margins … This drop in margins could reduce Asian refiners’ demand for incremental crude in the near term and weigh on global prices,” said Sukrit Vijayakar, director of energy consultancy Trifecta.
Average Singapore refinery margins this week fell below $6 per barrel, their lowest seasonal value in five years, due to high fuel availability but also because the recent rise in feedstock crude prices dented profits. Asian oil prices are higher than in the rest of the world.
While Brent and WTI are still below $70 per barrel, the average price for Asian crude oil grades has already risen above that level, to $70.62 per barrel, Thomson Reuters Eikon data showed.
Analysts said the increase stoke hopes in the industry that the market has finally turned a corner following a three-year downturn.
Vijay Valecha, chief market analyst at Century Financial Brokers, said the major reasons behind oil’s recent rally is the extension of the OPEC agreement and the lowest level of crude inventories.
“We expect Brent prices to move further higher to more than $75 due to an increase in demand.
Europe remained the major destination of Nigerian crude grades, accounting for 36.59 per cent of the total sales, with Asia and the Far East receiving 28.43 per cent, according to Group General Manager, Crude Oil Marketing Division, Malam Mele Kyari on Tuesday.
He said 16.57 per cent of Nigeria’s crude grades was exported to North America, 13.17 per cent to Africa, 2.84 per cent to South and Central America, while the rest of the world served as beneficiaries for the rest.

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