UPDATE 1-Oil prices fall on profit taking, rate hike uncertainty

31 Aug 2015 | Author: | No comments yet »

Changing trends challenge Nigeria to creatively utilse its crude – experts.

Brent crude futures for October delivery slipped nearly $1, or 2 percent, putting the benchmark on track for its fourth straight monthly decline, having risen in only two of the past 14 months.0124 GMT [Dow Jones] Crude-oil futures fell in early Asian trade Monday, easing from strong gains made towards the end of last week when oil prices rose 16-17% over just two trading sessions.

Changing trends in global crude oil demand are creating rising uncertainty for Nigeria, as appeal for its product – ‘Bonny light’ continues to wane, with a growing focus on ‘heavy crude’ which is produced by countries including Saudi Arabia, Mexico and Angola.Oil prices steadied on Friday after bouncing back from six-and-a-half-year lows on recovering equities markets, strong U.S. economic growth and news of low crude supplies from Nigeria.

Oil futures jumped 10 % on Thursday, within the largest one-day achieve in over six years, prompted by rallying inventory markets, information of diminished provides and obvious strikes by Venezuela to attempt to organize OPEC motion to curb the worldwide stoop in oil costs. Mixed signals by U.S. financial policymakers last week on whether the US Federal Reserve would raise interest rates next month was weighing on sentiment, Ang said. In a week of highly volatile trading Nymex crude gained 11.8% last week, and Brent crude gained 10.1%. “The swing in market sentiment has helped oil prices to recover from recent lows,” ANZ Bank ANZBY -1.20 % says. “The recovery in oil prices could be short-lived as the U.S. driving season is coming to end. Experts consequently say that for Nigeria to optimally sustain its economy under prevailing circumstances, it must come up with creative ways to deploy its crude. Shell’s Nigerian unit declared force majeure on Bonny Light crude oil exports on Thursday after shutting two key pipelines in the country due to a leak and theft.

Some Fed policymakers left the door open to a September interest rate hike at an annual central bankers meeting on Friday in comments that appeared to contradict those by the New York Fed president earlier in the week who said a rate increase seemed “less compelling”. They suggest that Nigeria should begin to refine more of her crude locally and then export for optimum returns, and also veer more into extracting by-products such as petro-chemicals, fertiliser and ethanol among others, from it to boost the economy. Investors are eyeing a slew of economic data, including key U.S. non-farm payroll data, later this week that could give direction on a possible US rate hike when Fed policy makers meet on Sept. 16-17. “If prices hold above these levels, there is a chance that prices could move higher this week, which should hinge on optimistic nonfarm payrolls,” Phillip Futures said. Oil is holding losses after a slide this month below $40 a barrel, the lowest since February 2009, on concern slowing demand in the U.S. and China will leave the global market oversupplied. Heavy crude is capable of yielding higher volumes of derivatives such as Automotive Gas oil (otherwise known as diesel), as well as Naphtha, than is the case with Nigeria’s ‘Bonny light’, which was until recently preferred by most refiners.

Global oil markets have fallen by a third since May and are still well under half their value a year ago thanks to a huge oversupply of fuel and sluggish demand. Libya posted a budget deficit of 4.5 billion dinars ($3.3 billion) in the first seven months of 2015 as oil production fell and weak oil prices weighed, the Tripoli-based central bank said on Sunday. Eklavya Gupte, a senior editor with Platts, who spoke on the current state of West Africa’s crude oil market, said refineries across the globe can now process heavy crude because of new technologies and that this has prompted many refinery operators across the world to look away from Nigeria and its ‘Bonny light’. Gupte said a country like Angola for instance, has heavy crude, which is also sweet and because of this, the United States of America now buys more of Angolan crude than Nigerian.

According to him , India is now the biggest buyer of Nigerian crude, about 20 per cent, because it has large refining capacity, on account of its huge population. The reported that economically struggling Venezuela has been ing different Group of Petroleum Exporting Nations (OPEC) members to push for an emergency assembly in coordination with Russia to provide you with a technique to cease the present oil worth rout. Bonnington said Nigeria is benefitting from the crisis in Libya because the traditional buyers of that country’s crude have now turned to Nigeria in the interim.

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