Brent crude dropped below 124 dollars a barrel on Thursday, after weak Chinese manufacturing data sparked concerns that energy demand growth could slow in the oil consumer.
China’s factory activity shrank this month for a fifth successive month, with the overall rate of contraction accelerating and new orders sinking to a four-month low, the HSBC flash purchasing managers index (PMI) showed last Thursday.
“It’s a surprising reading, and is contrary to improving monetary conditions and stabilising external conditions,” said Natalie Robertson, a commodities strategist with ANZ Bank in Melbourne.
“It reflects Chinese demand on the ground, which has a significant impact on commodity markets.”
Brent crude shed 58 cents to 123.62 dollars a barrel, after settling 8 cents up at 124.20 dollars a barrel.
U.S. crude was down 76 cents at $106.51. The benchmark rose $1.20 to settle at $107.27 on Wednesday.
HSBC’s PMI survey, the earliest indicator of China’s industrial activity, fell back from February’s four-month high, slipping to 48.1, and is likely to reinforce the more bearish views on China’s economic trajectory.
“Growth momentum could slow down further amid a combination of sluggish export new orders and softening domestic demand.
“This calls for further easing steps from the Beijing authorities,” HSBC chief China economist, Qu Hongbin, said in a statement.
Slowing activity could mean a further relaxation of monetary policy to help underpin growth in the world’s second-biggest economy.
But lingering inflation risks uncovered by the survey highlight the dilemma facing China’s policymakers who are determined to keep a lid on prices.
Asian shares gave back most of their earlier gains on Thursday after the data was released.
Oil prices also came under pressure from renewed worries about the euro zone debt crisis hitting oil demand.
Portugal’s core public deficit nearly tripled in the first two months of this year, stoking concerns the country may miss its budget targets and follow Greece in requiring more rescue funds.
Investors will now look to manufacturing data in Europe to be released on Thursday, with flash PMI estimates from across the euro zone forecast to show an overall improvement versus February, according to a media poll.
But losses in oil prices were capped by data showing U.S. crude stocks fell 1.16 million barrels to 346.29 million barrels in the week to March 16.
A media poll of analysts had forecast a 2.4-million-barrel build..
Oil markets continue to be driven by the prospect of supply disruptions from Iran, analysts said.
The market is now balancing Saudi assurances that it would make up for any supply shortfalls against the potential risk for the loss of oil from Iran.
This will take place amid tighter Western sanctions on Tehran over its disputed nuclear programme, they added.
“The market remains stretched in terms of spare capacity in our view.
It also is close to the point where the price-reducing effect of further output increases is likely to be countered by the price-increasing effect of perceived reductions in spare capacity,” said analysts at Barclays Capital in a research note.
South Korea would support a release by industrialized countries of oil from strategic reserves to help stem high prices.
Worries that the standoff between the West and Iran over Tehran’s nuclear programme could hit supplies have lifted Brent prices by around 15 per cent this year.
Buhari Thumbs Up For NLNG As NNPC Reviews Activities
The Nigerian National Petroleum Corporation (NNPC) held its head high as it commenced activities for the week following commendation from President Muhammadu Buhari for rallying shareholders to make Nigeria Liquefied Natural Gas Limited (NLNG) a company to reckon with.
Buhari who is also the Minister of Petroleum Resources gave the commendation at the ground breaking of the NLNG Train 7, recently.
He said that the NLNG had always been associated with success and had become a global company.
“The NLNG Train 7 represents another historic milestone in the history of NLNG. NLNG story has been associated with success,” he said.
The president also said that the NLNG had contributed 114billion dollars in taxes to Nigeria, and tthat with NLNG Train 7, there would be more jobs that would touch the lives of everyone particularly the host community.
He expressed joy how the NLNG had transformed from just a project to a very successful company in about 30 years.
The Minister of State for Petroleum Resources, Chief Timipre Sylva, urged all shareholders to work hard to ensure the successful completion of the project which he said would boost government’s efforts to make Nigeria a fully industrialised nation.
Sylva also said the project would help the nation’s gas development aspiration.
NNPC’s Group Managing Director, Mallam Mele Kyari, that there was consensus among shareholders and board members to take the next step towards providing additional capacity which should be greater than what was on ground.
The NNPC GMD thanked President Muhammadu Buhari for his quick intervention which ensured the eradication of all pre-existing stumbling blocks on the path of NLNG Train 7 project
Also in the week under review, Minister of State for Petroleum, Sylva commended President Buhari at a ceremony to mark the execution of Shareholders Agreement between the NNPC, the Nigerian Content Development & Monitoring Board (NCDMB) and Zed Energy.
Total Nigeria Advocates Petroleum Subsidy Removal
Managing Director Total Nigeria, Plc, Mr Imrane Barry, says removal of petrol subsidy will help government to redirect its earnings to support infrastructure development for economic growth and development.
Barry made this known when he featured on a roundtable on Downstream and midstream at the Nigeria International Petroleum Summit (NIPS) in Abuja.
He spoke on the topic “The down/midstreams: Paths to the future through holistic and integrated solution”.
He said that signing of the Petroleum Industry Bill would help to unbundle the oil and gas industry and encourage development, private investment and create jobs.
“The petrol subsidy regime costs the country approximately 2.6 billion dollars (N1 trillion) per year and the country can no longer afford it.
“The removal of the subsidy will allow government direct more of its earnings towards infrastructure and social development,” he said.
He said that since government had declared decade of gas, there was need for Investment in Natural Gas.
He added that government needed to continue to push policies that would favour private participation and investment in the gas value chain, production, storage and distribution.
“Also, government needs to give incentives for investors in the sector, tax rebates etc to encourage long term participation.
“In the B2C sector, the government should put in place incentives for customers to switch from white fuels to gas powered machines for road transportation.
“They should continue investment in the nation’s critical infrastructure that aids trade and commerce,’’ he added.
He further called for the fixing of Apapa ports and other ports in Nigeria, development of interstate road network, fixing of rail lines for human and cargo transportation
Commenting on impact of COVID-19 pandemic to global oil market, he said that it made the market volume shrank by 30% while margins became weak(Losses) with aviation sector mostly affected for the following reasons.
He added that the global economy was badly affected generally due to airport closure, drop in international prices of jet fuel platts which , led to a huge loss in aviation business due to contractual agreement with international airlines coupled with large amount of “old stock” in tank.
“PMS is a regulated product, with the price fixed by the government; resulting in fixed margins.
“The devaluation of the Naira from N360 to N380 during the pandemic, coupled with rising inflation in the country further eroded this “fixed margin” for the players in the downstream sector,” he said
He urged government to ensure speedy passage of the PIB to help the sector play its part effectively.
Partners Execute Shareholder Agreement For Brass Products Terminal
The Nigerian National Petroleum Corporation, (NNPC), along with their partner, the Nigerian Content Development & Monitoring Board, NCDMB, and Zed Energy have executed a shareholders’ agreement for the establishment of a 50 million litre Petroleum Products Terminal in Brass, Bayelsa State.
The N10.5 billion Brass Petroleum Products Terminal project is expected to deliver an automated 50 million litre depot with two-way product jetty, automated loading bay, and 6 automated tanks for storage of 30 million litres of Premium Motor Spirit (PMS)and 20 million litres of Automotive Gas Oil (AGO) and Dual Purpose Kerosene (DPK).
While speaking at the signing ceremony, the Minister of State for Petroleum Resources, Chief Timipre Sylva commended President Muhammadu Buhari for his giant strides in the Niger Delta which is making a huge impact on the people of the area.
“I make bold to say today without any fear of contradiction that no President has impacted the people of the Niger Delta like President Muhammadu Buhari. Aside from what we are witnessing today, remember there is also the Brass Fertilizer & Petrochemical Company, the Oloibiri Oil and Gas Museum and the Oil & Gas Park in Ogbia, all under Mr. President,” the Minister stated.
Sylva added that the establishment of the Terminal further demonstrates Mr. President’s commitment to the enhancement of the livelihood of the Niger Delta people particularly, the riverine communities in Bayelsa State where people purchase products at exorbitant prices due to logistics challenges associated with transporting products to that area.
Speaking shortly after signing the agreement, the Group Managing Director of the NNPC, Mallam Mele Kyari said the Corporation was proud to be part of the project which aside ensuring products availability in all nooks and crannies of the Niger Delta, will also guarantee the nation’s energy security and generate employment.
“This Terminal will create 1,000 direct jobs during the construction phase, and over 5,000 indirect jobs during its operation. Considering the potential for employment when completed, this will definitely reduce youth restiveness in the Niger Delta area and will also address the problem of illegal refining in the area,” Kyari stated.
In his remarks, the Executive Secretary of NCDMB, Simbi Wabote stated that this milestone was as a result of strong interagency collaboration and public-private sector partnership.
“The NCDMB will continue to drive such partnerships across the industry to bring development in Nigeria,” he noted.
Earlier, the Coordinator of the Project and Group General Manager, National Petroleum Investment Management Services (NAPIMS), Mr. Bala Wunti stated that the project would enhance the economics of marine petroleum products distribution.
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