China COVID-19 Easing, US Weather Buoy Oil Prices
By Adedapo Adesanya
Oil prices hit a three-week high on Tuesday as the market returned from the Christmas holiday spurred by hopes of a demand recovery as China eases its COVID-19 restrictions.
Brent crude was up 41 cents or 0.5 per cent to trade at $84.33 a barrel, while the United States West Texas Intermediate (WTI) crude gained 26 cents or 0.33 per cent to quote at $79.82 per barrel.
This saw both benchmarks hitting their highest level since December 5 as China announced on Monday a major easing of its COVID-19 travel quarantine rules after Winter Storm Elliott knocked offline around 1.5 million barrels per day of refinery capacity in the US Gulf Coast.
China, the world’s largest crude importer, said that by January 8, inbound travellers to China would no longer be subjected to mandatory travel quarantine.
This is happening even as the country is seeing a surge in COVID-19 cases after abandoning other parts of its so-called “zero Covid” policy that was in place for over two and a half years.
Despite the soaring number of infections and disruption to industries and supply chains, oil demand could be set for a major boost in the world’s top crude oil importer after the initial COVID-19 waves, analysts say.
On Tuesday, oil was also supported by refinery closures in the US due to the severe Winter Storm Elliott. The vast storm swept through Canada and the US just ahead of the Christmas holiday weekend, bringing freezing temperatures, snow, and icy conditions. This led to the interruption of power supply in some areas just as thousands of flights were cancelled, and Christmas travel plans were disrupted.
Also, hard-freeze warnings were issued for all the states along the US Gulf Coast, where most of the refining capacity is located.
Also adding to the support was concern over a possible production cut by Russia as President Vladimir Putin on Tuesday signed a decree that bans the supply of oil and oil products to nations participating in the price cap from February 1 for five months.
Russia might cut oil output by 5 per cent to 7 per cent in early 2023 as it responds to price caps, according to Deputy Prime Minister Alexander Novak last Friday.
Oil Market Grows on Positive Inflation Signal, Supply Factor
By Adedapo Adesanya
The oil market improved by more than 1 per cent on Friday to record its second-straight week of gains, as supplies tightened in some parts of the world and US inflation data indicated price rises were slowing.
Brent futures grew by $1.29 or 1.6 per cent to $79.89 a barrel, as the US West Texas Intermediate crude (WTI) increased by $1.30 or 1.8 per cent to $75.67 a barrel.
Data on Friday showed the US Personal Consumption Expenditure (PCE) index, the Federal Reserve’s preferred inflation gauge, rose 0.3 per cent in February on a monthly basis compared with a 0.6 per cent rise in January.
On a 12-month basis, core PCE increased 4.6 per cent, a slight deceleration from the level in January. Including food and energy, headline PCE rose 0.3 per cent monthly and 5 per cent annually, compared with 0.6 per cent and 5.3 per cent in January.
The softer-than-expected data came with monthly energy prices in the world’s largest economy decreasing by 0.4 per cent while food prices went up by 0.2 per cent, with goods prices climbing 0.2 per cent and services increasing 0.3 per cent.
In other data from the report, personal income rose 0.3 per cent, slightly above the 0.2 per cent estimate. Consumer spending climbed 0.2 per cent, compared with the 0.3 per cent estimate.
This points to the fact that inflation and supported oil prices could point to less aggressive interest rate hikes from the US central bank, lifting investor demand for risk assets like oil.
Oil prices were also buoyed after producers shut in or reduced output at several oilfields in the semi-autonomous Kurdistan region of northern Iraq following a halt to the northern export pipeline.
Since Saturday, Iraq has been forced to halt around 450,000 barrels per day of crude exports, or half a per cent of global oil supply, from the Kurdistan region (KRI) through a pipeline that runs from its northern Kirkuk oil fields to the Turkish port of Ceyhan.
Turkey stopped pumping Iraqi crude from the pipeline after Iraq won an arbitration case in which it said Turkey had violated a joint agreement by allowing the Kurdistan Regional Government (KRG) to export oil to Ceyhan without Iraq’s consent.
The Organisation of the Petroleum Exporting Countries and allies (OPEC+) led by Russia are likely to stick to their existing output deal at a meeting on Monday.
OPEC+ Likely to Keep Output Cut Levels as Group Meets April 3
By Adedapo Adesanya
The Organisation of the Petroleum Exporting Countries and its allies (OPEC+) will likely stick to its existing deal to cut oil output at a meeting on Monday, April 3.
According to Reuters, this was said disclosed by five delegates from the producer group after oil prices recovered following a drop to 15-month lows due to banking fears and demand worries.
Brent crude has recovered towards $80 a barrel after falling to near $70 on March 20 as fears ease about a global banking crisis and as a halt in exports from Iraq’s Kurdistan region curbs supplies.
OPEC+ is due to hold a virtual meeting of its ministerial monitoring panel, which includes Russia and Saudi Arabia, on Monday.
The consensus was that Kurdistan curbs and recent price drops were not sufficiently important to affect the overall OPEC+ policy path for 2023.
Kurdistan’s crude oil exports – around 400,000 barrels per day shipped through an Iraqi-Turkey pipeline to Ceyhan and then on tankers to the international markets – were halted late last week by the federal government of Iraq.
Last week, the International Chamber of Commerce ruled in favour of Iraq against Turkey in a dispute over crude flows from Kurdistan. Iraq had argued that Turkey shouldn’t allow Kurdish oil exports via the Iraq-Turkey pipeline and Ceyhan without approval from the federal government of Iraq.
Talks between officials from Kurdistan and from the Iraq federal government have failed in recent days, but they are set to continue next week.
Three other OPEC+ delegates also told Reuters that any policy changes were unlikely on Monday. After those talks, the next full OPEC+ meeting is not until June.
Last November, OPEC+ reduced its output target by 2 million barrels per day – the largest cut since the early days of the COVID-19 pandemic in 2020. The same reduction applies for the whole of 2023.
Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, has said OPEC+ will stick to the reduced target until the end of the year.
Oando to Quit Nigerian, Johannesburg Stock Exchanges
By Dipo Olowookere
The board of Oando Plc has informed the investing community of its intention to leave the Nigerian and Johannesburg stock exchanges in the coming months.
The reason for exiting the stock market, according to the energy firm, is to become a private company and to achieve this, its core investor, Ocean and Oil Development Partners Limited (OODP), has offered to buy all the shares held by minority shareholders in Oando.
OODP is offering to pay N7.07 in cash or its equivalent in South African Rand (ZAR) for each of the stock, which it said represents a 58 per cent premium to the last traded share price of Oando on Tuesday, March 28, 2023, being the day prior to the date it submitted the scheme application to the Securities and Exchange Commission (SEC).
Oando trades its shares on the floors of the Nigerian Exchange (NGX) Limited and the Johannesburg Stock Exchange (JSE).
This news comes hours after the company announced that it had bounced back into profitability after years of dishing out losses to the frustration of shareholders.
In its unaudited financial results for 2021, Oando reported a profit after tax of N34.7 billion, in contrast to the loss after tax of N140.7 billion of the preceding year.
Before now, Oando has had it rough with regulators in Nigeria, leading to its suspension from the market and a court tussle over allegations that it tampered with its financial statements to deceive investors.
In the notice released this week, Oando said after the acquisition of “the shares of all minority shareholders in Oando,” it would “subsequently be delisted from NGX and JSE and re-registered as a private company.”
At the moment, the energy firm said it has “applied for the SEC’s No Objection to the scheme, noting that the deal is “subject to the approval of the shareholders of Oando at the Court-Ordered Meeting of the company, as well as the sanction of the Federal High Court.”
However, it disclosed that, “The terms and conditions of the transaction will be provided in the scheme document, which will be dispatched to all shareholders following the receipt of an order from the Federal High Court to convene a Court-Ordered Meeting,” promising to update the market “upon receipt of requisite approvals from shareholders and regulators.”
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