Oil prices hit new 2016 highs despite lingering excess

Brent crude reached fresh 2016 highs on Friday and was poised for its biggest monthly gain in seven years as a weak dollar and falling U.S. production tempered concerns about a lingering excess of physical oil.

A looming rise in Middle East output capped gains, but investor sentiment held the optimism that has helped lift oil futures nearly 80 percent higher than January lows.

Brent crude futures rose 12 cents to $48.26 a barrel by 8:20 a.m. ET (1220 GMT). U.S. crude was up 46 cents at $46.49 a barrel, with both contracts hitting fresh 2016 highs.

Investment bank Jeffries on Friday said the market “is coming into better balance” and would flip into undersupply in the second half of the year.

“Global spare capacity is now 2 million barrels per day (bpd), or about 2 percent of global demand. This is a precariously low level,” it added.

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Party politics aside, Nigeria must industrialize Now

By Ugo Nwagwu

The best time for Nigeria to industrialize was 35 years ago. The second best time; NOW!

Pre Independence Malaysia was rich in natural resources such as porcelain, spices (which were then traded as currency) and large deposits of Tin. As part of the British Empire, the British took over administration of the economy and also introduced Rubber and Palm Oil trees for commercial purposes and then brought in Chinese and Indian expats to work the fields and mines instead of locals. Pre 1970s Malaysia had an economy completely dependent on natural resources exported while basically everything it consumed was imported. Sound familiar?

Today, Malaysia though still state oriented, has a newly and open industrialized market economy. This is because in the 60s and 70s, the Malaysian government took painful and costly steps to industrialize their economy. The Malaysian government committed itself to a transition from being solely reliant on mining and agriculture as an economy to a multi-sector economy. Mining and agriculture dominated the economy up until the 80s and since then, it’s been the industrial sector driving growth. It took 25 years for the turn around.

If you read the papers and follow the news concerning all things about Nigeria’s economy, three things continue to drive the headlines: Oil prices, Nigeria’s insatiable appetite for FOREX (Dollar, Pounds, Euros and now potentially, Yuan) & diversifying to Agriculture.

One thing we still aren’t talking about is how to push past the politics of now, and blame shifting to chasing after real solutions that will benefit our children and their children. We are a nation of traders. We have always been a nation of traders and even if we exploit more of the agricultural sector, chances are that we will take the traders approach.

As we diversify into agriculture, the tendency will be to treat its produce as we’ve done with oil. Right now, Nigeria remains one of the largest crude production and exporting country but what plagues the average Nigeria today is the availability of refined crude. We continue to import refined crude at an amazing rate negating whatever balance of trade that could have been helped by crude export. Even if the state’s 3 refineries were working to capacity, it won’t produce enough to support a population of 180 million and growing.

Now we want to take the same mentality into agriculture by “mining” produce and then exporting the raw produce without any thought to a “National Vertical Integration” whereby we keep all our “raw produce” and process them here to first serve the immediate need of the population (limiting imports of those processed goods) and then exporting them. Simply put, if we grow tomatoes, we should be able to process every part of the tomato into everything Nigerians need from a tomato i.e. canned tomatoes, ketchup, tomato sauce, tomato paste, tomato puree all in Nigeria. This goes for every single agricultural produce we grow or plan to grow.

That’s one example but it can be applied to every sector in which raw materials are found. Palm oil is used in over 50% of everything found in a supermarket and you know which country has one of the world’s largest palm oil production potential? Nigeria! As a nation we need to invest not just in mining gold, lead, zinc or whatever metals are beneath the soil to smelting them and turning them into actual products that we can then export to other parts of Africa and the world thereby controlling all parts of its margins.

This level of industrialization would pump millions of jobs into the economy and lead to economic growth unrivaled in any part of Africa in its history.

How do we start? First we must resist the urge to turn the Naira-Yuan swap into another level of shopping binge for cheap Chinese goods but instead import heavy machines and power plants to build factories and manufacturing plants. We must continue to attract foreign investments that solely act to serve Nigeria in an industrialization master plan.

The Federal Government can pursue public private partnerships with matching investments and use the capital markets as part of their exit strategy thereby also providing a return of investments to shareholders. This is certainly more productive than subsidizing fuel consumption.

We don’t need more retail outlets and companies selling us high priced alcoholic beverages. We have enough cheap clothing and shoes coming in droves from all parts of the world.

If we do this and leave the politics and tribalism that only serves to separate us and shift our attention from the selfish ambition of today’s politician from the Local Government level to the Federal Government and all ministerial staff, then maybe in 25 years, we too would serve as an example for other countries to follow. If we get this done and done right, no one would be as concerned about the price of $1.

To borrow a phrase from one of Nigeria’s senators from Bayelsa, Senator Ben Muray Bruce, my name is Ugo Nwagwu and I just want to make common sense.

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World Bank Raises 2016 Oil Price Forecast – Naija247News

Amid improving market sentiment and a weakening dollar, the World Bank is raising its 2016 forecast for crude oil prices to $41 per barrel from $37 per barrel in its latest Commodity Markets Outlook, as the oversupply in markets is expected to recede.

The crude oil market rebounded from a low of $25 per barrel in mid-January to $40 per barrel in April following production disruptions in Iraq and Nigeria and a decline in non-Organization of the Petroleum Exporting Countries production, mainly U.S. shale. A proposed production freeze by major producers failed to materialise at a meeting in mid-April.

“We expect slightly higher prices for energy commodities over the course of the year as markets re-balance after a period of oversupply,” said John Baffes, Senior Economist and lead author of the Commodities Markets Outlook. “Still, energy prices could fall further if OPEC increases production significantly and non-OPEC production does not fall as fast as expected.”

All main commodity indexes tracked by the World Bank are expected to decline in 2016 from the year before due to persistently elevated supplies, and in the case of industrial commodities – which include energy, metals, and agricultural raw materials – weak growth prospects in emerging market and developing economies.

Energy prices, including oil, natural gas and coal, are due to fall 19.3 percent in 2016 from the previous year, a more gradual drop than the 24.7 percent slide forecast in January. Non-energy commodities, such as metals and minerals, agriculture, and fertilizers, are due to decline 5.1 percent this year, a downward revision from the 3.7 percent drop forecast in January.

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Osinbajo: Private refineries better than FG’s – The Cable

Vice-President Yemi Osinbajo says privately-run refineries perform better than state-owned refineries, adding that it is a problem to have only public refineries.

Speaking at a town hall meeting in Lagos on Saturday, the professor of law said the pains Nigerians are currently facing are just birth pains.

“President Muhammadu Buhari and I are completely committed to providing competent leadership. We have no other agenda,” Osinbajo said.

“We acknowledge there are pains but they are just birth pains. This is not the end. We are currently compiling the Social Register for the poor and as soon as the budget is passed, we will begin to pay 5000 Naira to the poor.

“Stealing and Corruption cuts across all ethnic groups in Nigeria. We must decide to become a new tribe of Nigerians. We must disallow division. We must also disallow the use of religion and ethnicity.”

Speaking on the fuel crisis bedevilling the nation, Osinbajo said: “The NNPC is currently the only one importing refined fuel. We are in the process of providing a final solution to the fuel scarcity.”

“The presence of only public refineries is a problem. Private refineries run better. We are seeking private investments in co-managing the refineries.

“Some parties have indicated interest in the private refineries including the Oil majors.”

On the entertainment sector, Osinbajo said “we are working on solutions to piracy including technology options, active advocacy and better collaboration between the Entertainment industry and the government”.

He restated that the Lagos-Calabar project has been included in the budget, regarding rail lines as “the most effective way of moving goods”.

ON POWER

“Nigeria recorded a peak of 5000 MW in February. We paid outstanding debts and curtailed vandalism. But the Forcados pipeline caused a drop of about 500MW while issues with the transmission lines caused a further drop.

“We are currently working on improving the supply of gas to power plant and fixing transmission line problems.

“We have removed fixed tariff charges. You only pay for what you use. We are also engaged with labour unions on cost reflective tariffs.”

YUAN DEAL

“The deal is we have some credit with the Chinese, so doing business with the Chinese can be done without the dollar.

“The Yuan deal will help facilitate trade with China and also help the ease of doing business.

Asides giving single digit SME loans, Osinbajo said Buhari’s leadership is also aimed at building “a country where anyone who holds public office must be able to explain their wealth”.

He said the APC-led government will continue with the town hall meetings across the country to engage Nigerians on the state of the nation.

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Oil prices set for one of the biggest weekly rises in 2016 – Reuters

Oil prices rose in Asian trade on Friday, setting crude futures on course for solid weekly gains, as market sentiment becomes more upbeat despite ongoing oversupply.

International benchmark Brent crude futures LCOc1 were trading at $44.98 per barrel at 0418 GMT, up 45 cents or 1 percent from their last settlement.

U.S. West Texas Intermediate (WTI) crude was up 50 cents or 1.2 percent at $43.68 a barrel.

Brent has risen about 4.5 percent so far this week and WTI 8 percent, putting the contracts on track for a solid price rally. Crude is up by more than two-thirds since its 2016 lows between January and February.

Traders said that sentiment in the entire commodity complex had turned more confident, with new cash being put into the market by investors, lifting prices.

Another factor has been producers taking advantage of higher prices by locking in production.

“We would expect producers in the U.S. taking every opportunity to aggressively hedge as soon as there is opportunity when oil prices recover for short periods of time,” French investment bank Natixis said.

Falling output, especially in the United States, where many producers are shutting down following an up to 70 percent price rout since 2014, is also helping to lift the market.

Natixis said it expected U.S. oil production to drop by at least 500,000 to 600,000 barrels per day (bpd) this year, compared with 2015, and by another 500,000 bpd in 2017.

Despite the recent rally, oil markets remain oversupplied as between 1 and 2 million barrels of crude are being pumped out of the ground every day in excess of demand, leaving storage tanks around the world filled to the brim with unsold fuel.

“The energy complex remains volatile ahead of the 1Q16 reporting period which will likely be worse than what we thought was already an ugly 4Q15,” U.S. investment bank Jefferies said.

Source: Reuters

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Oil rebounds to close at a 2016 high

LONDON, April 20 (Reuters) – * Oil prices rebounded to a 2016 high Wednesday as U.S. stocks of crude posted a smaller-than-expected build and there was a drawdown in gasoline and distillate stocks.

* Russia said on Wednesday it was prepared to push oil production to new historic highs, just days after a global deal to freeze output levels collapsed and Saudi Arabia threatened to flood markets with more crude.

* Iran also said it was determined to recover its share of the world oil market following the lifting of sanctions, and can withstand low prices.

NIGERIA

* Nigeria’s June loading programmes were still emerging, with a slight increase in Qua Iboe exports to 317,000 barrels per day (bpd) but one less cargo for each of the Agbami, Escravos and Usan export plans.

* Senegal’s SAR bought a cargo of Qua Iboe in its tender, but the grade remained easily accessible.

* The arbitrage to the United States had mostly closed as dated Brent was trading at a larger premium relative to U.S. WTI.

* As a result, the bulk of the some 15 cargoes left for May loading were expected to seek an outlet in Europe.

* Despite an ongoing force majeure on Forcados, and the still-missing Erha export plan for May, Nigerian crude was in ample supply.

* Qua Iboe differentials were under pressure, as several May cargoes are left for sale and there is a slightly longer bpd programme in June.

Source: Reuters Africa

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Shell remits $42bn to Nigerian govt

Shell Petroleum Development Company (SPDC) and the Joint Venture (JV) partners remitted $42 billion to the Nigerian Government between 2011 and 2015.
Nigeria’s Nation newspaper report on Tuesday said that Royal Dutch Shell’s 2015 Sustainability Report released on Monday stated the oil giant also paid royalties and corporate taxes worth $1.1 billion to the Nigerian government last year.

It added that of the amount, Shell paid $0.6 billion and its subsidiary, Shell Nigeria Exploration and Production Company (SNEPCo), paid $0.5 billion.

The report also said that Shell Companies in Nigeria (SCiN) awarded 93 percent of its total contracts during the year under review to indigenous firms and spent $0.9 billion on local contracting and procurement.

It noted that 94 percent employees of SCiN are Nigerian.

The report also said that out of the $145.1 million paid to Niger Delta Development Commission (NDDC) in 2015, SPDC JV and SNEPCo contributed $62.3 million, and $50.4 million was spent on social investment projects.

According to the report, gas flaring volume from SPDC JV facilities in Nigeria was reduced by 85 percent between 2002 and 2015, while flaring intensity (the amount of gas flared for every tonne of oil and gas produced) was reduced by around 70 percent over the same period.

Source: APA

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Iran urges oil producers to keep discussing freeze, says it can’t sign up – Reuters

DUBAI, April 18 (Reuters) – Iran urged other oil producers on Monday to continue talks on an output freeze to prop up crude prices, but insisted it was justified in not freezing its own output.

Iranian OPEC Governor Hossein Kazempour Ardebilli was speaking to his oil ministry’s Shana news agency after talks on Sunday between producers in Doha collapsed when Saudi Arabia demanded that Iran join a freeze. Iranian representatives were not present at the talks.

“We support cooperation between OPEC and non-OPEC member countries and efforts to bring stability to the oil market, and we urge all producers to continue their negotiations,” Ardebilli said.

But he also said Iran had made it clear that it wanted to regain its share of the oil market lost when it was hit by economic sanctions, and that “its position is supported by most OPEC and non-OPEC members around the world”.

The sanctions were lifted in January after Iran and the group of world powers known as the P5+1 agreed on curbs to Tehran’s nuclear programme.

Ardebilli said that if Iran participated in the proposed output freeze, it would in effect be maintaining sanctions on itself.

“Those who opposed the nuclear deal between Iran and the P5+1 and the lifting of cruel sanctions on the Islamic Republic… proposed the oil output freeze in January 2016, having the illusion that Iran has no other choice but to accept,” he said, in an apparent reference to Saudi Arabia.

Source: Reuters

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Oil prices plunge 5% in wake of failed Doha deal – MarketWatch

Crude-oil prices pared some losses in mid-Asia trade Monday after tumbling more than 6% in the opening hour following a failure of the key producers to agree on a production cap that could have tightened up the supply market.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in May traded at $38.28 a barrel, down $2.08, or 5.2% in the Globex electronic session. June Brent   crude on London’s ICE Futures exchange fell $2.20, or 5.1%, to $40.92 a barrel.

The sharp decline in oil spilled over to regional stocks. Energy stocks in Hong Kong and Australia were all off about 2.8%, while the broader Hang Seng Index  and S&P/ASX 200 benchmarks  fell 1.2% and 0.3%, respectively.

Japan’s Nikkei Stock Average  was off 3%, as the Japanese yen  came close to reaching a fresh 18-month high. Elsewhere, the Shanghai Composite Index   slipped 1.5%,

Over the weekend, Russia and heavyweight producers inside the Organization of the Petroleum Exporting Countries walked away from a much-anticipated meeting empty handed. The group had gathered to discuss a production cap to limit output to January’s levels as a way ease the global oversupply.

The key driver behind the breakdown was Saudi Arabia’s refusal to participate in the deal without its geopolitical rival Iran pledging to do the same. Since economic sanctions against Iran were lifted in January, the country has vowed to keep ramping up production until output is back up to at least 4 million barrels a day.

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Azerbaijan says Doha draft sees oil production frozen until October – TASS

MOSCOW, April 16 (Reuters) – A draft of an agreement prepared for the meeting between OPEC and non-OPEC member countries in Qatar on Sunday sees oil production being frozen at the January level until October, TASS news agency quoted the Azeri energy minister as saying on Saturday.

The minister, Natig Aliyev, described the draft as a “gentlemen’s” agreement.

Aliyev was not available for immediate comment when called by Reuters.