The Organization of the Petroleum Exporting Countries’ (OPEC) daily basket price stood at 28.45 U.S. dollars a barrel on Thursday, compared with 29.03 dollars on Wednesday, according to OPEC Secretariat calculations released on Friday.
Also known as the OPEC reference basket of crude oil, the OPEC basket, a weighted average of oil prices from different OPEC members around the world, is used as an important benchmark for crude oil prices.
Oil rises after OPEC warn members to stick to quotas
Oil prices rose for a fourth day in a row on Friday, putting crude on track for a weekly gain of about 10 per cent, after Saudi Arabia pressed allies to stick to production quotas and banks, including Goldman Sachs, predicted a supply deficit.
Brent crude was up 18 cents at $43.48 a barrel by 0756 GMT while United States oil futures rose 17 cents to $41.14.
Both contracts are set for their strongest weekly gains since early June after Hurricane Sally cut United States production while OPEC and its allies laid out steps to address market weakness.
Goldman Sachs predicted the market would be in a deficit of three million barrels per day (bpd) by the fourth quarter and reiterated its target for Brent to reach $49 by the end of the year and $65 by the third quarter of 2021.
Swiss bank UBS also pointed to the possibility of undersupply in the oil market, forecasting Brent would rise to $45 a barrel in the fourth quarter and $55 by mid-2021.
Meanwhile, a tropical depression in the western part of the Gulf of Mexico could become a hurricane in the next few days, potentially threatening more United States oil facilities.
The Saudi Arabian energy minister said those who gamble on oil prices would be hurt “like hell”.
The Organisation of the Petroleum Exporting Countries (OPEC) and other producers in OPEC+ are cutting 7.7 million bpd of output and the group stressed at a meeting on Thursday that it would take action against members not complying with the deal.
In the Gulf of Mexico, United States offshore drillers and exporters began a clear-up on Thursday after Hurricane Sally weakened to a depression and started rebooting idle rigs following their closure for five days.
Edited By: Abdulfatah Babatunde
DPR generates N742.4bn revenue in 8 months
The Department of Petroleum Resources (DPR) says it generated a total sum of N742,471,639,376. 96 billion for the Federal Government from January to August 2020.
The News Agency of Nigeria reports that the committee, chaired by Mr Musa Adar, visited the regulatory agency as part of its oversight duties.
He said, “DPR is a revenue collection agency for revenues accrueable to government from oil and gas industry operations.
” DPR operates a cashless revenue system which enables all revenue remittances to be paid directly to the federation account in total compliance with the Treasury Single Account (TSA) policy of government.
“The agency conducts comprehensive quarterly and annual reconciliations of revenue payments to ensure accurate and timely remittances to the federation account.
“It also collects oil and gas royalties which represents proportional value of oil and gas production and sales from oilfields, gas flare penalties imposed for gas flaring,” he said.
According to him, DPR collects concession rentals paid for grant of oil and gas acreages by exploration and production companies and miscellaneous oil revenue.
He said that these consisted of statutory application fees, licence and permit fees and penalties.
Auwalu said that the challenges posed by COVID-19 and oil price crash had made it compelling for a new thinking and approach for strategic repositioning and business optimisation in the industry.
The DPR boss said the agency had, therefore, adopted several approaches and streamlined its processes to deepen its influencing role as an opportunity house and business enabler for the Industry.
He said the approaches include cost control and management, strategic partnership, vertical integration and diversification and portfolio rationalisation and operational resilience.
On his part, Adar told newsmen that the National Assembly would expedite action on the passage of the Petroleum Industry Bill (PIB) in order to reposition the industry.
“We want to assure Nigerians that once we receive the PIB, we will ensure its quick passage.
” There is a good relationship between the executive and lawmakers and there will be a bipartisan approach toward the bill because we must put Nigeria first as patriotic citizens,” he said.
He said the visit to the regulatory agency had enlightened the lawmakers on the need to enact legislation that would ensure maximisation of Nigeria’s oil and gas resources.
Edited By: Chioma Ugboma/Oluwole Sogunle
Oil jumps above $41 as storm hits United States output, inventories drop
Oil rose for a second day on Wednesday, gaining more than two per cent, as a hurricane closed United States offshore production and an industry report showed United States crude inventories unexpectedly decreased.
More than a quarter of United States offshore output was shut on Tuesday due to Hurricane Sally.
The American Petroleum Institute on Tuesday said crude inventories fell 9.5 million barrels, rather than increased as analysts expected.
Brent crude rose 86 cents or 2.1 per cent to $41.39 a barrel by 1012 GMT, while United States crude added 85 cents or 2.2 per cent to $39.13.
Both contracts rose by more than two per cent on Tuesday.
“Overnight, the APE provided a further injection of bullish impetus,’’ said Stephen Greenock of oil broker P.M.
“As much as a feel-good factor appears to have returned to the oil market, underlying fundamentals remain far from supportive.’’
The storm-related shutdowns may help reduce the stockpile, although refineries were also closed, cutting demand.
“Oil prices were lent further support by the APE and the weather,’’ said Commerzbank analyst, Eugene Weinberg.
“Despite an unfavourable fundamental and technical backdrop.’’
Oil prices collapsed to historic lows as the coronavirus crisis hit demand.
Prices have dropped in September, pressured by rising virus cases and concerns about demand.
The Organisation of the Petroleum Exporting Countries and International Energy Agency have both cut their demand outlooks this week.
A panel of OPEC+ oil ministers meets to review the supply pact on Thursday and is unlikely to recommend further output curbs despite the price drop, sources told Reuters.
Edited By: Abdulfatah Babatunde
Emefiele canvasses stakeholders support to stimulate economic growth
Mr Godwin Emefiele, Governor, Central Bank of Nigeria (CBN) on Tuesday, called on stakeholders in the banking and financial system to take up proactive steps in supporting growth and wealth creation of key sectors of the economy.
Emefiele made the call at the 13th Annual Banking and Finance Conference, organised by the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos.
The conference had “Facilitating a Sustainable Future: The role of Banking and Finance”, as its theme.
Emefiele said that COVID-19 had brought on several challenges to the economy and indeed the banking sector.
He said it, however, offered a unique opportunity to build a more resilient economy that is better able to contain external shocks, whilst supporting growth and wealth creation in key sectors of the economy.
“Proactive steps on the part of stakeholders in the banking and financial system in supporting the growth of sectors, such as Agriculture, ICT and Infrastructure, will strengthen our ability to deal with the challenges that have been brought on by COVID-19, and stimulate the growth of our economy,”he said.
He said the closure of schools, hotels and restrictions on movement led to contractions in the Transportation (-49%), Accommodation(-40%), Construction(-32%) and Education (-24%) sectors.
Emefiele said that other sectors such as financial services and telecommunications grew by 28 and 18 per cent respectively.
He said that these sectors which have the ability to leverage on digital channels witnessed strong growth.
This, he said, was so, as Nigerians relied on these tools to communicate and to conduct business and financial transactions.
He said that the Agriculture sector continued to record positive growth (1.6%), supported by productivity gains in the sector, interventions by the government and improved demand for local produce.
Emefiele also said that restrictions on global travel by land and air, along with the slowdown in commercial activities, led to a significant reduction in the demand for crude oil.
According to him, these factors contributed to the 65 per cent decline in crude oil prices between January and May 2020.
” This decline in prices, along with OPEC reduction of our production quota, led to a significant decline in our foreign exchange earnings, along with a more than 60 per cent decline in revenues due to the federation account.
“Today, crude oil prices have recovered from its low of $19 in April 2020, but it is yet to return to pre-pandemic levels of over $60 in January 2020,” he said.
According to him, significant disruptions in domestic and global supply chains as a result of lockdown measures in key markets in Asia and Europe between March and May 2020, affected delivery of inputs and machinery to firms in Nigeria.
He said that this contributed to a slowdown in manufacturing activities (-8.8 percent).
Emefiele said that the impact of the pandemic and the resulting slowdown in economic activity led to a significant outflow of funds from emerging market economies.
He said there were uncertainties on the scale at which the virus could spread, and the impact it could have on economic activity, in the absence of a vaccine.
This, according to him, led investors to withdraw over $100bn worth of funds from emerging markets between February and April 2020.
Emefiele said that the funds withdrawn were subsequently invested in safe haven assets such as US treasury bills and the Japanese Yen.
He noted that the drop-in flows between February and April 2020 was unprecedented and surpassed the decline in flows witnessed during the Global Financial Crisis in 2008.
According to him, Nigeria was not exempted from the drop-in flows, as capital importation into the country declined from $6bn in Q2 of 2019 to $1.2bn in Q2 of 2020.
The apex bank governor said the drop in crude oil earnings as well as the drop in foreign portfolio inflows significantly affected the supply of foreign exchange into Nigeria.
He said: ” In order to adjust for the decrease in supply of foreign exchange, the naira depreciated at the official window from N305/$ to N360/$ and to N380/$.
” These adjustments along with increased efforts to restrict undue speculative activities, has led to a growing unification of rates across all the fx market segments.
“In addition, the band between the parallel market and the official exchange rate over the past month, has narrowed recently due to some of the measures taken by the CBN to curb illegal fx transactions”.
He said that with the decline in foreign exchange earnings and subsequent adjustments in the value of the naira vis-à-vis the US dollar, the CBN had continued to implement a demand management framework.
He said that the management framework was designed to support improved production of items that could be produced in Nigeria, and further conservation of its external reserves.
He said that these measures had helped to prevent a significant decline in the country’s reserves.
“Our external reserves currently stand at $36 billion and are sufficient to cover eight months of import of goods and services,” he said.
Emefiele said that inflationary pressure persisted in the first and second quarters of the year due to several factors.
In addition to the disruption to global and domestic supply chains as a result of COVID-19, inflation was exacerbated by the increase in VAT rate, exchange rate adjustment and seasonal food supply shocks due to the onset of the farming season and other structural bottlenecks.
According to him, inflation in July 2020 stood at 12.8 percent.
He said, however, that inflation was expected to begin to moderate towards the end of the 4th quarter.
This, according to him, is as we approach the harvest season, along with the phased withdrawal on the restrictions of movement and other restrictions imposed as a result of COVID-19.
The CBN governor said that given the impact of Covid-19 on key economic variables, the fiscal and monetary authorities took unprecedented measures to prevent the economy from going into a tailspin.
He said the first objective was to restore stability to the economy by providing assistance to individuals, SMEs and businesses that had been severely affected by the pandemic, as well as by the lockdown measures.
He said that the impact of these measures helped to prevent larger contraction in 2nd Quarter GDP growth as projected by analysts.
“With the phased withdrawal of the lockdown measures, resumption of travel by land and air, improvements in crude oil prices from $19 in April 2020 to an average of $44 in August 2020, and continued implementation of our interventions in the agricultural and manufacturing sectors, we expect that GDP growth for the 3rd quarter will reflect a significant recovery relative to the 2nd quarter”, he said.
Edited By: Remi Koleoso/ Oluwole Sogunle