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Economy

Oil Prices Mixed Despite Tight Supply, Strong Fuel Demand

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oil demand worries

By Adedapo Adesanya

Oil traded mixed on Monday as tight global supply and strengthening fuel demand in the United States and beyond supported prices, just as oil producers remained cautious about adjusting their approach.

Brent crude rose by 22 cents or 0.26 per cent to trade at $85.75 per barrel while on the other hand, the US West Texas Intermediate (WTI) crude lost 28 cents or 0.33 per cent to sell at $83.48 per barrel.

The global energy supply crunch continues to move oil prices upward this week, a result of traders pricing in the ongoing rise in fuel demand.

The market is also holding onto worries about coal and gas shortages in China, India and Europe, which spurred fuel-switching to diesel and fuel oil for power.

This is coming as demand in the US is back in line with five-year averages in the world’s largest fuel consumer having recovered swiftly from the worst days of the pandemic in 2020.

Just as this is happening, the Organisation of the Petroleum Exporting Countries and allies (OPEC+) has said it needs to remain cautious with its approach to oil production adjustments despite rising prices.

This was made known by the Saudi Arabia oil minister and co-chair of the group, Mr Abdulaziz bin Salman, explaining that higher production is only justifiable when there is a clear purpose for it, something he said was not needed at the moment.

The energy minister also said he expected a significant increase in combined OPEC+ oil supply by the end of next year, even without the hypothetical return of Venezuela or Iran to international markets.

OPEC+ is adding 400,000 barrels per day to its combined output every month, but some members have found it difficult to boost production, and this has resulted in over compliance with the voluntary cuts and continued tight supply.

However, the cartel has so far resisted calls for a greater boost in output to catch up with demand.

A top investment bank, Goldman Sachs, said a strong rebound in global oil demand could push Brent crude prices above its year-end forecast of $90 a barrel. It also estimated that gas-to-oil switching could contribute at least one million barrels per day to oil demand.

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

Economy

Naira Trades N566.22/£1 at Interbank, Bitcoin Gains 0.8%

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Bitcoin loses

By Adedapo Adesanya

The Naira appreciated by 84 kobo against the British Pound Sterling at the interbank segment of the foreign exchange (FX) market on Wednesday to close at N566.22/£1 compared with the preceding day’s N567.06/£1.

Equally, the indigenous currency edged higher by N2.73 against the Euro at the same market window to finish at N470.99/€1 in contrast to N473.72/€1 it was exchanged a day earlier.

However, against the United States Dollar, the local currency suffered a loss as it depreciated by 30 kobo to close at N415.30/$1 versus N415.00/$1 it ended on Tuesday.

It was not the same scenario with the Naira at the Investors and Exporters (I&E) window as the Naira closed stronger than the greenback, appreciating by 17 kobo or 0.04 per cent to trade at N416.33/$1 compared with the previous day’s exchange rate of N416.50/$1.

This occurred amid an increase in the FX trades at the market window as the turnover went up by 12.2 per cent or $13.55 million to $124.57 million from the preceding session’s turnover of $111.02 million.

Meanwhile, at the digital currency market, the bulls took control amid a renewed investor confidence, causing seven of the 10 tokens tracked by Business Post to end in the positive territory yesterday.

The highest gainer for the session was Tron (TRX) as its value went up by 1.7 per cent to sell for N39.43, followed by Ripple (XRP) which appreciated by 1.4 per cent to N436.99, and Binance Coin (BNB), which grew by 0.9 per cent to trade at N192,540.74.

In addition, Bitcoin (BTC) gained 0.8 per cent to trade at N24,183,994.94, Dash (DASH) recorded a 0.7 per cent appreciation to sell at N74,381.31, Litecoin (LTC) added 0.7 per cent to its value to close at N80,114.51, while Ethereum (ETH) made a 0.4 per cent jump to trade at N1,802,564.40.

However, Cardano (ADA) depreciated during the session by 7.3 per cent to N805.27, Dogecoin (DOGE) retreated by 0.6 per cent to sell at N99.9, while the US Dollar Tether (USDT) declined by 0.1 per cent to sell for N577.45.

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Economy

Turkish Pipeline Fire Drives Crude Oil Prices Higher

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Crude Oil Prices

By Adedapo Adesanya

For the fourth trading session, crude oil prices soared at the global market on Wednesday on the back of a fire that briefly stopped the flow of a pipeline from Iraq to Turkey.

This increased concerns about an already tight supply outlook amid worrisome geopolitical troubles in Russia and the United Arab Emirates, holding prices in the bullish territory.

Consequently, the price of the Brent crude futures rose by 93 cents or 1.06 per cent to trade at $88.44 per barrel, while the West Texas Intermediate (WTI) crude futures jumped $1.53 or 1.8 per cent to $86.96 per barrel.

It was gathered that to address the pipeline issue yesterday, Turkey had to cut oil flows on the Kirkuk-Ceyhan pipeline after an explosion on the system, although the cause of the explosion was not announced.

The pipeline carries crude out of Iraq, the second-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), to the Turkish port of Ceyhan for export.

In recent days, supply concerns have after Yemen’s Houthi group attacked the United Arab Emirates (UAE), OPEC’s third-largest producer, while Russia, the world’s second-largest oil producer, has built up a large troop presence near Ukraine’s border, stoking fears of invasion.

The tensions raise the prospect of supply disruptions at a time when OPEC and their allies, together called OPEC+, are already having difficulty meeting their agreed target to add 400,000 barrels per day of supply each month.

On the back of these, analysts expect prices to remain high as jet fuel consumption is rising with growth in international flights, while road traffic is much higher than the same time last year.

Outages in Libya, Ecuador, and Kazakhstan, coupled with downgrades to US, Russia, and Brazil forecasts, together result in 1 million barrels per day, indicating lower supply this month against the previous forecast.

The International Energy Agency (IEA) on Wednesday raised its demand growth estimates by 200,000 barrels per day for both 2021 and 2022.

Demand increased by 1.1 million barrels per day to 99 million barrels per day in the fourth quarter of 2021, defying expectations of a serious hit to consumption due to the Omicron wave, the IEA said in its Oil Market Report (OMR).

The market is tighter than expected, the agency said, but still warned that there would be a surplus in the first quarter of 2022, with “demand set for a seasonal decline, exacerbated by more teleworking and less air travel.”

US President Joe Biden explained that his administration will work to try to increase oil supplies in the world’s largest oil producer.

The administration had authorized the release of 50 million barrels of crude oil – in a mix of loans and sales – from the nation’s Strategic Petroleum Reserve last year, but it had minimal effect on the market.

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Economy

Senate Pass Bill to Establish National Rice Development Council

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Price of Paddy Rice

By Adedapo Adesanya

The Senate has passed a bill seeking to establish the National Rice Development Council as part of the federal government’s effort to cut down on rice importation and improve the country’s foreign exchange earnings.

The passage of the bill followed the consideration of a report by the Committee on Agriculture and Rural Development.

Speaking at the presentation, the Chairman of the Committee, Mr Abdullahi Adamu, said the council will support the comprehensive development of the rice sector and the organisation of rice stakeholders to enhance local production of rice in Nigeria.

He explained that the organisation will transform the activities of rice farmers, rice processors, millers, researchers, marketers and other important stakeholders across the entire rice value chain, particularly the clusters of smallholder rice farmers and small scale millers spread all over the country.

“Mr President and distinguished colleagues, with our natural comparative advantage in the area of rice production as a country, Nigeria should consider the need to put in place a National Rice Development Council and a fail-safe comprehensive national rice development roadmap that will guide us not only into a regime of self-sufficiency in production but also for export purposes, employment generation for our teaming youth and growth of our economy.

“The Nigerian rice industry exists in the abstract as there appears to be no form of coordination in the absence of a properly structured rallying point.

“Today, we have Paddy Rice Dealers Association of Nigeria (PRIDAN), Rice Farmers Association of Nigeria (RIFAN), Rice Processors Association of Nigeria (RIPAN), Rice Millers Association of Nigeria (RIMAN) and many more.

“This Bill seeks to establish that rallying point and a comprehensive national operational and governance structure for a complete rice value chain process.

“Mr President and distinguished colleagues, this Bill on its own merit will improve government efforts for efficient policy and regulatory framework for the Nigerian rice industry; promote enabling business and investment environments for rice stakeholders; support the growth of the rice industry in Nigeria and in the sub-region as well as promote the sustainability of foreign exchange earnings put at about $2 billion annually for Rice related importation to the country.

“The framework created by thịs Bill will pull investment into rice production, provide the missing link between rice production and industrialization, provide employment, reduce migration from rural to urban cities and enhance socio-economic activities all over the country.

“Few countries having Rice Council include Rice Council of Tanzania, USA Rice Council, Directorate of Rice Development (India), Rice Association of Thailand, among others,” he said.

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