AS Nigeria’s stock market turn positive with significant capital gains ahead of official conclusion of the general elections, oil prices, yesterday shot up, apparently over uncertainty over the outcome of the election’s as well as the political tension in Venezuela. Also the pressure on oil price appears to be coming from a positive sentiment over United States–China talks.
International Brent crude oil
futures were at $67.28 a barrel, up 16 cents, or 0.24 percent, from
their last close, while U.S. West Texas Intermediate (WTI) crude futures
were at $57.39 per barrel, up 13 cents, or 0.23 percent, from their
last price.
“Risk appetite across global markets should improve
as President Trump extends the deadline of trade talks with China,”
Harry Tchilinguirian, global oil strategist at BNP Paribas in London,
said.
“Supply risk is ever present with Venezuelan tensions
brewing a notch higher, the National Oil Corporation in Libya refusing
to start production at the El Sharara field,” he added, while also
citing uncertainty over elections in top African oil exporter, Nigeria.
U.S. sanctions on Iranian and Venezuelan crude plus involuntary curbs in
Nigeria and Libya are lending support to efforts to balance the market
and support prices, efforts led by member of the Organization of the
Petroleum Exporting Countries (OPEC) and non-OPEC producers such as
Russia. Further brightening the global economic picture, U.S. President
Donald Trump on Sunday signalled a potentially bruising trade war with
China could be averted.
Trump tweeted he would postpone a March
01, 2019 deadline for higher tariffs on Chinese goods and looked forward
to a meeting with Chinese President Xi Jinping when a Sino-American
deal was sealed.
Goldman Sachs analysts said that “the near-term
outlook for oil is modestly bullish over the next two to three months”,
but added that the outlook for later in 2019 was weaker due to a surge
in U.S. exports and an “an increasingly uncertain economic, policy and
geopolitical backdrop”.
Meanwhile, Trump resumed his attacks on
the Organisation of Petroleum Exporting Countries, OPEC, saying the
world is too fragile to handle a price hike and urging the cartel to
“relax and take it easy.” Trump’s war of words with the OPEC punctuated
big price swings in 2018, as he pressured the group to keep the taps
open to help consumers. The president’s intervention follows a price
rally of about 25 percent this year due to production cuts from OPEC and
its allies, diminishing fears about the economic impact of the US-China
trade war and Washington’s imposition of sanctions on Venezuelan oil
shipments.
“We might see a less aggressive stance on supply cuts
from the Saudis, this might stop them from cutting deeper,” said
Giovanni Staunovo, an analyst at UBS Group AG in Zurich.
“But I
still think Saudi Arabia has the incentive to see higher oil prices, and
deliver the cuts agreed in December, when OPEC and its partners agreed
to remove 1.2 million barrels a day’’, he added.
NOPEC risk
The
risk to OPEC comes in the form of the so-called ‘No Oil Producing and
Exporting Cartels Act’, or NOPEC, an act resurrected by US lawmakers
that proposes making the organization subject to the Sherman antitrust
law, used more than a century ago to break up the oil empire of John
Rockefeller. Congressional support for the bill intensified last year as
oil prices neared a four-year high, and Trump publicly blamed OPEC for
high pump prices in the US In the past, the White House has opposed the
NOPEC legislation – both George W Bush and Barack Obama threatened to
use their veto.
OPEC’s concern now is that Trump may break with
his predecessors, and angering him by not going “easy,” as he requested
in his tweet, raises the stakes. Trump, before becoming president,
didn’t just support the NOPEC bill, he was a cheerleader for it. “We can
start by suing OPEC for violating antitrust laws,” he wrote in his 2011
book “Time to Get Tough: Making America #1 Again.”
Whether by
coincidence or design, Trump’s latest tweet comes on the eve of
International Petroleum Week, which opens in London on Tuesday. The
annual event gathers the who’s who of the oil market and industry for
several days of conferences, deal-making and cocktail parties.
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