Oil Edges Higher as Investors Expect Tighter Supply | Business Post Nigeria – Business Post Nigeria

Oil Edges Higher as Investors Expect Tighter Supply | Business Post Nigeria – Business Post Nigeria

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By Adedapo Adesanya
Oil prices rose further on Monday with investors betting that global supply will remain tight, keeping the Brent crude up by 42 cents or 0.49 per cent to $86.48 per barrel as the West Texas Intermediate (WTI) crude oil futures grew by 46 cents or 0.55 per cent to $84.28 per barrel.
Crude oil prices have posted four consecutive weeks of gains, which is the longest winning streak since October, in evidence that the demand recovery remains robust as fears about the effect of Omicron die down.
News that China will release oil from its strategic reserve next month had the potential to disrupt the rally but did not, with Brent crude reaching a two-month high last week and still traded at over $86 per barrel at the opening session.
The world’s largest exporter plans to release oil reserves around the Lunar New Year holidays between January 31 and February 6 as part of a plan coordinated by the United States with other major consumers to reduce global prices.
Supply outages and signs the Omicron variant will not be as disruptive as feared for fuel demand are the foundations that the market has built its bullish sentiment on.
This is also happening as the Organisation of the Petroleum Exporting Countries and allies (OPEC+) is not providing enough supply to meet the strong global demand.
Even as the alliance is gradually relaxing output cuts implemented when demand collapsed in 2020, many smaller producers like Nigeria cannot raise supply and others have been wary of pumping too much oil in case of renewed COVID-19 setbacks.
The market was pressured by a rise in Libyan output with the country’s oil production rebounding to 1.2 million barrels daily, meaning that its crude oil output was back to normal after a series of outages.
Libya’s oil production dropped sharply earlier this month after the National Oil Corporation shut down a key pipeline for much-needed repairs. The pipeline shutdown led to a 200,000-barrel per day decline in production.
That came on top of the latest field blockade by the Petroleum Facilities Guard that began in December and involved four fields, including El Sharara.
The market also relaxed fears that Russia was preparing to attack Ukraine if diplomacy failed with the US government moving on contingency plans for supplying natural gas to Europe if the conflict between both countries disrupts Russian supplies.
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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.
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There was neither a price gainer nor a price loser at the NASD Over-the-Counter (OTC) Securities Exchange on Thursday, January 20 as the key performance indicators also remained unchanged at the close of transactions.
Business Post reports that the market capitalisation of the NASD Exchange retained the previous value of N633.06 billion, while the NASD Unlisted Securities Index (NSI) remained unchanged at 747.61 points.
The none movement witnessed yesterday came as the trading activity chart witnessed changes, with the volume of trades, the value of transactions and the number of deals carried out at the bourse declined.
On Thursday, investors traded a total of 4,000 units of securities in contrast to the 195.2 million units of securities transacted at the preceding session, indicating a fall of 100 per cent.
Equally, the value of shares exchanged by the market participants depreciated by 99.9 per cent to N767,100 from the preceding session’s N4.1 billion.
The total number of deals executed went down by 80 per cent as only two deals were performed at the exchange as against the 10 deals printed at the midweek session.
It was observed that Central Securities Clearing Systems (CSCS) Plc maintained its position as the most traded stock by volume on a year-to-date basis with 649.5 million units of its shares valued at N13.6 billion. VFD Group Plc claimed second place with a turnover of 916,161 units of its stocks valued at N331.5 million, while Friesland Campina WAMCO Nigeria Plc was in third place with a turnover of 205,566 units of its securities valued at N24.3 million.
The most traded stock by value on a year-to-date basis was also CSCS Plc with the sale of 649.5 million units valued at N13.6 million, VFD Group Plc was also in second place with 916,161 units valued at N331.5 million, while the third, Friesland Campina WAMCO Nigeria Plc, has exchanged 205,566 units valued at N24.3 million.
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The Naira recorded no movement against the United States Dollar at the Investors and Exporters (I&E) segment of the foreign exchange (FX) market on Thursday.
Consequently, the exchange rate closed at N416.33/$1 when trading activities for the day were brought to an end.
The Naira traded flat yesterday amid a drop in FX demand at the market segment as the value of transactions went down by 16.4 per cent or $20.47 million, according to data from FMDQ Securities Exchange.
The forex turnover for the trading day was $104.10 million compared with the $124.57 million reported a day earlier and this caused the stability of the local currency against its American counterpart.
However, the domestic currency continued its depreciation against the American currency at the interbank segment of the market, losing 15 kobo yesterday to trade at N415.45/$1 compared with the preceding day’s N415.30/$1.
But it appreciated by N1.04 against the pound Sterling on Thursday to trade at N565.18/£1 in contrast to Wednesday’s exchange rate of N566.22/£1 and against the Euro, the Naira lost 17 kobo to sell for N471.16/€1 compared to N470.99/€1 of the last session.
Meanwhile, the bears overthrew the bulls at the cryptocurrency market yesterday, causing eight of the 10 digital currencies monitored across several trading platforms to shed weight.
Binance Coin (BNB) lost 3.3 per cent to trade at N189,047.61, Ripple (XRP) went down by 2.6 per cent to trade at N421.85, Cardano (ADA) also made a 2.6 per cent drop to sell at N785.99, while Dash (DASH) slid by 2.4 per cent to trade at N71,838.14.
Further, Dogecoin (DOGE) depreciated by 2.3 per cent to sell at N92.14, Litecoin (LTC) recorded a 2.1 per cent depreciation to trade at N77,332.32, Bitcoin (BTC) posted a 0.8 per cent loss to close at N23,800,000.00, while the United States Dollar Tether declined by 0.2 per cent to quote at N576.21.
But Tron (TRX) gained 1.7 per cent during the session to trade at N39.93, while Ethereum (ETH) appreciated by 1.5 per cent to sell at N1,825,000.00.
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The Brent crude depreciated on Thursday as investors took profits after a recent price rally spurred by supply disruptions amid stronger demand.
The price of the commodity slipped by 11 cents or 0.12 per cent yesterday to $88.33 per barrel, while the West Texas Intermediate (WTI) crude dropped 67 cents or 0.77 per cent to sell at $86.29 per barrel.
Supply concerns have mounted this week after a fire temporarily halted flows through an oil pipeline running from Iraq’s Kirkuk to the Turkish port of Ceyhan on Tuesday.
Earlier in the week, an attack by Yemen’s Houthis on the United Arab Emirates, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), heightened geopolitical risks.
The market is also getting support from supply shortfalls from the OPEC+ producer group comprising OPEC and allies led by Russia.
According to the International Energy Agency (IEA) on Wednesday in its monthly oil report, the group produced about 800,000 barrels per day below its production targets in December.
The IEA said that while the oil market could be in a significant surplus in the first quarter of this year, inventories are likely to be well below pre-pandemic levels, just as it upgraded its 2022 demand forecast.
However, since price hit their highest in seven years, traders took their profit on Thursday, leading the commodity to fall.
Prices also dipped after the US Energy Information Administration reported a modest inventory build of 500,000 barrels for the week to January 14 compared with a draw of 4.6 million barrels for the previous week.
A day earlier, the American Petroleum Institute (API) had estimated a draw in crude oil inventories of 1.4 million barrels.
An investment bank, Goldman Sachs says it expects global inventories to fall to the lowest in more than 20 years as did the spike in geopolitical tension in the Middle East following the drone attacks on UAE facilities by the Yemeni Houthis.
OPEC+ believes Brent crude could before long rise to $100 per barrel, a scenario that some investment banks have already forecast but many said this would not be ideal for the cartel as it would stoke inflation.
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