Crude Oil

Oil Price Gains For 5th Consecutive Month

The average global crude oil prices have continued to rise for the 5th consecutive month, the Organisation of the Petroleum Exporting Countries said on Tuesday.

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OPEC attributed the continued rise in international oil prices to the supportive oil market fundamentals deployed by the group to stem the earlier plunge in crude oil costs.

It disclosed this in the ‘Highlights of the OPEC Monthly Oil Market Report’ released on Tuesday and obtained by our correspondent in Abuja.

Commenting on crude oil price movements, the organisation said, “Spot crude prices rose for the fifth consecutive month in March on the back of continuing supportive oil market fundamentals.

“The OPEC Reference Basket increased $3.51 or 5.7 percent m-o-m (month-on-month) to average $64.56/barrel, the highest on monthly terms since January 2020.”

It added, “In the first three months of 2021, the ORB was up by $8.82, or 17.2 percent to average $60.22/barrel. Crude oil futures prices were higher in March extending previous monthly gains.”

OPEC stated that the ICE Brent front-month rose by $3.42 in March, or 5.5 percent, to average $65.70/barrel, and NYMEX WTI increased by $3.30, or 5.6 per cent, to average $62.36/barrel.

It noted that consequently, the Brent WTI spread widened to $3.34/barrel on a monthly average.

Brent, against which Nigeria’s crude oil is priced, rose by $0.63 to $63.91 per barrel as of 9:50pm Nigerian time on Tuesday.

Meanwhile, OPEC has increased its oil demand outlook for 2021 just as the bloc and its allies plan to unleash more crude supplies over the next few months, according to S&P Global Platts.

In its closely watched monthly oil market report released April 13, OPEC raised its demand forecast by 190,000 barrels per day from its March estimate, expecting consumption to average 96.46 million bpd this year, citing economic stimulus programmes and a further easing of COVID-19 lockdown measures.

Year on year, global oil demand was projected to grow 5.95 million bpd in 2021, compared with the 5.89 million bpd forecast in March.


Crude Oil

Oil Prices Jump On Global Growth Projection

Oil prices edged higher on Wednesday on the prospects for stronger global economic growth amid increased COVID-19 vaccinations and a report that crude inventories in the United States, the world’s biggest fuel consumer, fell.

READ ALSO: IMF Predicts 2.4% Economic Growth For Nigeria In 2021

Brent crude futures for June rose by 16 cents, or 0.3 per cent, to $62.90 a barrel by 0657 GMT while U.S. West Texas Intermediate crude for May was up 14 cents, or 0.2 per cent, to $59.47.

The International Monetary Fund (IMF) in its April 2021 World Economic Outlook (WEO)  presented Tuesday projected a six percent growth for the global economy in 2021, moderating to 4.4 percent in 2022, while the estimated growth for Sub-Saharan Africa, at 3.4 percent, with South Africa at 3.1 percent. and Nigeria’s economy, another oil producer to grow by 2.4 percent in 2021.

This is in effect which means that the global economy is recovering, in addition to the spread of vaccination, are the push for the oil price which had plunged in 2020.

But optimism about talks between the United States and Iran over Iran’s nuclear programme and an impending increase in supply by major oil producers capped gains.

“Optimism on the global economic outlook boosted sentiment in the crude oil market,” analysts from ANZ bank wrote in a note on Wednesday.

Prices were buoyed as data on Tuesday showed U.S. job openings rose to a two-year high in February while hiring picked up. This followed earlier data showing improvement in the services sectors in the U.S. and China.

The International Monetary Fund said on Tuesday unprecedented public spending to fight COVID-19 would push global growth to 6% this year, a rate unseen since the 1970s.

Optimism on a wider rollout of vaccines also boosted prices with U.S. President Joe Biden moving up the COVID-19 vaccine eligibility target for all American adults to April 19.

U.S. crude oil stockpiles fell more than expected in the week ended April 2, while fuel inventories rose, according to three market sources, citing American Petroleum Institute (API) figures ahead of government data on Wednesday.

Oil production in the U.S. is expected to fall by 270,000 barrels per day (bpd) in 2021 to 11.04 million bpd, the Energy Information Administration (EIA) said on Tuesday, a steeper decline than its previous monthly forecast for a drop of 160,000 bpd.

Iran and world powers held what they described as “constructive” talks on Tuesday and agreed to form working groups to discuss potentially reviving the 2015 nuclear deal that could lead to Washington lifting sanctions on Iran’s energy sector and increasing oil supply.

Oil prices dropped earlier this week after the Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, agreed to gradually ease oil output cuts from May.



Nigeria’s fiscal position remains precarious despite rising oil price

Bullish crude oil price since the beginning of the year have raised hope of a better global fiscal performance after severe disruptions caused by COVID-19 pandemic that unsettled oil-dependent economies.

READ ALSO: Livestock Sector Can Add N33tn To Economy —FG

The price rise of more than 75 percent since November 2020 has been on account of major economies reopening and vaccinating their populations after the pandemic shut down factories and grounded the aviation industry in March 2020.

But with the positive sentiments associated with rise in oil price, celebration from the Nigerian economy, sadly, comes off as premature as the country’s fiscal position still remains precarious.

Analysis shows that as of today, Nigeria’s economy can attain fiscal break-even position only if oil prices climb as high as $103 per barrel.

This was attained by incorporating the current official exchange rate at N380/$1, Federal Retained Oil Revenue to Gross Oil Revenue at 37 percent, Average Daily Production of 1.7 million barrels per day (OPEC quota), the current budgeted expenditure as well as budgeted Non-Oil + Other Revenue and Unfunded Revenue at N4.6 billion and N8.9 billion, respectively.

Over the years, the Federal Government has struggled to finance its budget mainly due to low revenues, which have been susceptible to oil price volatilities.

At year-end 2020, the Federal Government’s retained revenue was N3.94 trillion, indicating 73 percent of target of the revised N10.805 trillion 2020 budget, which reflected the effects of the COVID-19 pandemic.

This has resulted in an increasing budget deficit for the country and an increased borrowing culture by the government from both domestic and international sources.

Figures from the Debt Management Office (DMO) indicate that Nigeria’s total public debt as of December 31, 2020, was N32.915 trillion, including those for Federal and State Governments, as well as, the Federal Capital Territory. Debt stock is further projected to hit N38.68 trillion by December 2021, according to Zainab Ahmed, minister of finance, budget and national planning.

The Federal Government projects overall budget deficit to stand at N5.60 trillion for the year 2021, representing 3.93 percent of GDP.

With the planned borrowing of N4.69 trillion to finance the budget deficit, total public debt is expected to rise to N36.89 trillion by December 31, 2021.



WEEK AHEAD: More of same for naira, Bitcoin rally to continue

More of same for Naira

The Naira closed at N411.88 on the I&E window, a 0.21 per cent depreciation from N411.00 which it closed at the previous session on Friday, according to data from the FMDQ Security Exchange.

READ ALSO: CBN to phase out old cheques March 31

The currency also lost at the parallel market as data posted on, a website that collates parallel market rates, showed that the currency closed at N482.00, a 0.42 per cent depreciation from N480.00 as it exchanged hands on Friday. As a result of this, the spread between the unofficial market and the I&E window exchange rate is pegged at N70.12, which translates to a gap of 14.54 per cent. A look at the data tracked from FMDQ indicated that forex turnover increased from $36.92  million recorded on Wednesday, March 10, 2021, to $192.11 million on Thursday, March 11, 2021, being the highest dollar supply recorded in two weeks. However, the coming week wouldn’t be any different as the Naira is anticipated to continue to fluctuate around the threshold of N406/$1 and N412/$1.

Bitcoin’s bullish trend intensifies

It’s no longer news that the world’s most popular crypto has got its mojo back, but what seems to be news is that leading crypto experts are anticipating that the bullish rally is still in its early stages amid the fact that it has risen more than eighteen folds within a year. The crypto soared higher on Saturday and was trading at $61,050.29 with a daily trading volume of about $60 Billion. Bitcoin is up 23% for the week. It’s currently the most valuable crypto with a market value of $1.14 Trillion.

The flagship crypto’s importance for “commerce on the internet” has also helped its credence among a significant number of millennials globally. Its important to note that the strong holding fundamentals that have kept the flagship crypto above the $55,000 price levels in the past few days are the strong hands that came in to buy this latest dip. Finally, it’s key to note that Bitcoin is becoming very scarce, amid the bias that its present supplies are arbitrarily squeezed by strong institutional buying, as recent data reveal Bitcoin’s supply has been dropping for 12 months. Also, recent developments indicate that Zugacoin Cryptocurrency, founded by a Nigerian, Naira can now be comfortably used to purchase any type of vehicle, motorcycles, plastics and all the other products under the INNOSON Group anywhere in the world. This follows the sealing of a business partnership deal between Archbishop SamZuga of Zugacoin and Chief Dr Innocent Chukwuma of Innoson vehicle manufacturing company on Saturday, March 13, 2021. With these dynamics in play, the week ahead looks promising for the flagship crypto (Bitcoin) amongst others.

Oil prices continue rally

Brent Crude oil on Thursday 11th March 2021 gained momentum as it rose by 2.55% to close at $69.63, indicating a recovery from its slump recorded on Monday and Tuesday. The price of Brent Crude had topped $70 per barrel in the early hours of Monday this week before sliding down on account of the news of an attack by rebel Houthi rebel on the Saudi oil infrastructure on Sunday. The recent increase in oil price can be attributed to OPEC+’s decision to maintain the current production cuts for another month. According to the Foreign Minister of Saudi Arabia, Prince Faisal bin Farhan, while speaking after a meeting with his counterpart from Russia, Sergey Lavrov, the Organisation of Petroleum Exporting Countries is looking for a “fair” price for its crude. Afterward, Lavrov noted that the OPEC+ alliance was strong and there was nothing that could at this point undermine the good working relationship between Russia and Saudi Arabia. This is a strong indication that both parties are in synergy towards ensuring that Crude oil price continues its current bullish run, hence good news for oil in the week ahead.

External reserves on steady dip

Nigeria’s external reserve declined by 0.13% to stand at $34.67 on Wednesday, 10th March 2021 being a record low in 10 months. The country’s external reserve declined from $34.71 billion recorded as of Tuesday, 9th March 2021 to stand at $34.67 billion as of 10th March 2021. Nigeria’s current external reserve position indicates a total loss of $433.68 million in the month of March 2021. With the current unattractive investment environment coupled with the ripple effects of the COVID19 pandemic, Naira FPI’s aren’t likely to be motivated any time soon, hence depletion of our external reserve is most likely to persist in the week ahead.

NSE-30 companies post N1.13trn loss year to date

The top 30 companies listed on the Nigerian Stock Exchange (NSE) known as the NSE-30 have lost a total of N1.13 trillion in market capitalization year to date. The elite list, which consists of the top 30 companies in terms of market capitalization and liquidity, recorded a decline of 6.66% in market capitalisation from N17.00 trillion recorded as of 31st December 2020 to stand at N15.87 trillion as of 12th March 2021.

Oil Market

Nigeria’s 2021 Oil Market Playbook: Eyeballing Opportunities and Mitigating Threats

Global oil market playbooks are changing as countries look out for their interests in the glacial movement of oil prices and the market’s recent choppiness. India, for example, recently announced its decision to diversify its oil import markets as it angles towards lower average energy prices.

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The gambit sees the country looking to extend imports beyond its traditional trade partners of the United States of America (USA) and Guyana.  

The India market shift, analysts note, could set the tone for more aggressive supply chain competition amongst non-traditional suppliers of oil to India who would find the country a fine game for offering ‘sweeteners’ to take a piece of the Asian oil and gas market. How would the tactic pan out for prospective suppliers? the possible outcomes are mixed depending on the existing relationships between India and the new supplier and the type of oil produced in the prospective country of supply. For example, Indian industries prefer heavier oil to the lighter oil brands that come from countries such as Nigeria and Angola. This would mean that African countries would not be the first choices in India’s oil supply diversification plans.

Preferred countries for the Indian foray into new supply markets for heavy crude would be Iran and Venezuela, but the ongoing political tiffs between both countries and the USA would make these options very difficult choices.

Many non-oil-producing countries depend on OPEC and its allies, a group called OPECplus, to supply oil for their domestic consumptions. To strengthen oil price, OPECplus extended its production cuts to April 2021 with little exception to Russia and Kazakhstan. But as OPECplus uses the production cut to tighten the oil market, oil importers are seeing domestic growth chopped at the knees by the rising cost of oil imports.

The Local Cost of An Oil Squeeze

Analysts note that domestic inflation in oil-importing countries has started to rise above policymaker’s expectations and could lead to unexpected monetary tightening which in turn would raise domestic interest rates and clobber gross domestic product (GDP) growth.

Against this development, oil importers have started to look for strategies that would improve possible economic outcomes such as diversify their import sources to generate more supplier competition to contain a supplier price squeeze.

The Indian economy was adversely affected by the coronavirus pandemic as it recorded the highest number of coronavirus cases in the Asian continent. To curtail the spread of the virus the Indian economy enforced strict lockdown which adversely affected the economy. Although the Indian economy is out of recession as its GDP grew by +0.4% in Q4 2020, it recorded a pandemic induced recession in Q3 2020 as its GDP contracted by -7.3%

Fuel consumption has become an integral part of the Indian economy, therefore, activities in the international oil market affect the Indian economy. Also, recent reforms of the fuel taxation and subsidy system in India have meant that consumers would increasingly be susceptible to changes in the international oil market. Although India’s inflation rate eased to a 16-month low of 4.06% in January 2021 mainly on account of the softening of food and vegetable prices, the rise in crude oil prices and their transmission into retail fuel prices have posed a concern for the government’s economic recovery effort and the mandate by the Indian government to the Reserve Bank of India (RBI) to keep inflation within an average rate of 4% and a margin rate of 2% on either side of the average


Gas deals

Corporate oil, gas deals in Nigeria fall to lowest in 5yrs

The scale of corporate deals between privately held businesses and their investors in Nigeria’s oil and gas sector is at the lowest ebb in five years, as transactions hit a low of $123 billion in 2020, a sharp decline compared to a record high of $301 billion recorded in 2018.

READ ALSO: Why investors flock to Ikoyi, V.I despite challenges…

This is troubling because oil and gas sector deals such as mergers, acquisitions, asset sales, debt financing, among others, drive investments, improve infrastructure, technical expertise, and grow the economy, thus improving living standards.

According to data from IHS Markit, a London–based energy information resource, Nigeria recorded 82 oil and gas deals last year worth $123 billion, a 69 percent decrease compared to 138 deals valued at $208 billion in 2019.

The data also show that 2018 was Nigeria’s best performing year in the last six years with a total deal volume of 183 deals valued at $301 billion. This is lower when compared to $182 billion, $201 billion, and $196 billion recorded in 2017, 2016, and 2015, respectively.

A further breakdown of 2020 data reveals that the upstream sector accounted for about 45 percent of all deals recorded followed by the midstream sector with 26 percent, while the downstream sector and oil field service accounted for 24 percent and 5 percent, respectively.

Although investors in Nigeria’s energy sector are not immune to the economic effect of coronavirus and the impact of lower oil prices, which made acquisition financing much harder last year compared to previous years, however, experts say their fortunes are made worse by a regressive fiscal regime and increasing risk profile.

“Price volatility, tough fiscal regime, rough business environment, and lack of capacity are some of the biggest challenges facing Nigeria’s oil and gas deals in 2020,” Joe Nwakwue, chairman, Society of Petroleum Engineers (SPE) said.

In 2019 deals, IHS Markit showed the upstream sector was also responsible for the lion share of about 52 percent of total deals followed closely by the midstream sector accounting for about 40 percent, while oil field service and downstream sector account for the remaining share of 4 percent each.

“Nigeria needs to put the right fiscal regime that will make projects more valuable in the midstream and downstream sector which would attract the right kind investment,” Nwakwue said.

Elias & Co, a business law firm with specialty in mergers and acquisitions, said transactions in the energy sector had been less busy lately compared to six years ago.

“It is far from being inactive,” analysts at Elias & Co said in a note.

Mergers and acquisitions in Nigeria’s oil and gas sector have slowed in recent years after an initial surge two years ago when some indigenous players, buoyed by the Federal Government’s initiatives, took advantage of some divestment opportunities by international oil companies operating in the country.


Global Market

Price of petrol could rise as uncertainty looms in the global market

On Sunday, 28 February 2020, Nigerian oil marketers announced that Premium Motor Spirit (PMS) or petrol may go on sale for as much as N230 per litre in March.

READ ALSO: FUGAZ investors lose N34.68 billion in trading

The announcement was made after the Nigerian National Petroleum Corporation (NNPC), the same day, assured Nigerians in a press release that despite the increase in the price of crude oil, it has no plans to increase the ex-depot price of petrol in the month of March.

The state-controlled oil company had initially made a similar promise, early in February.

However, most filling stations across the country have reported the presence of a large queue of buys as people engage in panic buying.

The announcement has equally prompted some filling stations to engage in petrol hoarding.

The Federal Government in March 2020, announced the removal of fuel subsidy and full deregulation of the downstream sector of the oil industry, which will allow market forces to determine the price of the product.

According to a report, Mike Osatuyi, the National Operations Controller, Independent Petroleum Marketers Association of Nigeria (IPMAN), “Nigeria has crossed the bridge, there is no hiding place and the N1.2 trillion which was hitherto annual spending on subsidy, will be borne by the market.” 

Further commenting, Osatuyi stated that the rise in the prices of crude oil to $67 per barrel as of Sunday, 28 February makes it normal for the price of PMS to be between N220 per litre and N230 per litre

Currently, the world is expecting the Organization of Petroleum Exporting Countries (OPEC) and its allies to increase oil production as the excess crude that piled up during the pandemic as borders were shut down has disappeared.

As the world rally for more supply of crude oil, traders expect the OPEC+ coalition (led by Saudi Arabia and Russia) to agree to an increase in production when it meets on March 4.

If this is done it would be reversing some of the output cuts made in 2020 by the international body, likely reducing the global crude price and necessitating an increased output that oil-dependent countries like Nigeria could benefit from.

However, Prince Abdulaziz bin Salman, of Saudi Arabia has urged fellow oil-producing states to remain “extremely cautious” as it is not clear what level of impact the COVID-19 (coronavirus) pandemic could have on the global demand for oil if the output is increased.