Nigerian crude edged higher at the last trading session of the week amid the third straight weekly loss in the global crude oil market, as oil traders weighed OPEC+ commitment against the latest U.S. Jobs data, which lowered expectations that the Federal Reserve will stay dovish.
Nigeria’s Brass River, Bonny Light, and Qua Iboe are trading above $81.55 a barrel, about two dollars higher than the active Brent contract.
Bonny Light, named after the city of Bonny in the oil-rich Niger Delta, consistently commands a premium position in the world energy market. This black, viscous hydrocarbon is highly sought after because of its low sulfur content compared to other blends, its low impact on refinery equipment, and its reduced environmental impact through its byproducts.
OPEC saw an increase in oil production in May due to increased shipments from Iraq and Nigeria, which offset the effects of ongoing voluntary supply cutbacks by those members who supported the broader OPEC+ coalition.
Iraq and Nigeria increased oil output by 50,000 barrels per day each, while Saudi Arabia and the United Arab Emirates saw lesser increases.
Nigeria’s output remains at tepid levels as OPEC reduced the country’s quota from 1.7 million barrels per day to 1.5 million barrels per day in 2023, a target that has still been unmet. The nation attributes this ongoing problem to widespread oil theft, declining investment, and overt sabotage.
Dr. Chinyere Almona, Director-General of the Lagos State Chamber of Commerce and Industry, identified pipeline vandalism and crude oil theft as the main obstacles preventing oil majors from meeting their daily quotas. Almona added that it is difficult for modular refineries to obtain enough oil.
She also mentioned that the Dangote Petroleum Refinery and other modular refineries are unable to get crude from international oil corporations due to Nigeria’s poor crude oil production.
The global crude oil market is hyper-sensitive to U.S. interest rates amid an increase in U.S. jobs in May that exceeded forecasts by a significant margin, thereby maintaining the Fed’s current course of delaying rate cuts until September at the earliest.
Despite an increasingly bleak prognosis for inflation, the European Central Bank proceeded with its first interest rate decrease since 2019. High borrowing costs have the potential to impede economic growth and reduce oil demand. Shortly after the jobs report was released, the dollar gained by 0.8% to reach a high of more than one week.
Meltdown at global crude oil market
Saudi Arabia and Russia, two OPEC+ members, have supported oil prices, showing they are prepared to halt or reverse increases in oil output.
Nevertheless, due to worries about demand, crude fell for a third consecutive week, with WTI down 1.9% and Brent down 2.5%. Early this week, oil prices dropped because analysts perceived Sunday’s OPEC+ meeting as indicating increased supply, which is negative for prices.
Energy services company Baker Hughes reported that the number of active oil rigs in the United States dropped by four last week to 492—the lowest level since January 2022. The rig count is a leading predictor of future output.
Data from China, the country that purchases the most crude oil worldwide, revealed that while exports increased for a second consecutive month in May, imports of the commodity decreased, suggesting concerns about demand.
Following a drone strike on Thursday, the Novoshakhtinsk oil refinery in the southern Rostov area of Russia experienced substantial delays in its operations due to a fire.
According to the U.S. Commodity Futures Trading Commission (CFTC), money managers reduced their net long positions in U.S. crude futures and options during the week leading up to June 4.
Large oil firms have expressed regret about the effect that pipeline damage and oil theft have on the supply of petroleum for nearby refineries.
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