Oil price rally fizzled out yesterday as the United States (U.S.) dollar strengthened and as China further restricted movement amid doubled new COVID cases, prompting renewed concerns about oil demand.
WTI Crude prices were down by 0.84 per cent at $51.84 while Brent Crude prices slipped by 1.11 per cent at $55.37, after briefly topping $56 a barrel on Friday.The rally in oil, which last week posted its largest weekly gain since September, cooled off as this week began.
Nigeria, Africa’s major oil producer, depends on earnings from oil sale to finance its N13.588 trillion budget for this year. The budget has benchmark oil price of $40 per barrel; daily oil production estimate of 1.86 million barrels (inclusive of Condensates of 300,000 to 400,000 barrels per day); exchange rate of N379 per US Dollar; GDP growth projected at three per cent; and inflation closing at 11.95 per cent.
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Meanwhile, Nigerian LNG carrier ‘LNG Abuja II’ is due to arrive in Turkey on Jan. 20, according to ship-tracking data compiled sighted yesterday.
With a capacity of 170,000 cubic meters, the vessel left the Nigerian port of Bonny on Jan. 8 and is currently en route to its next destination, the Marmara Ereglisi LNG terminal, in Tekirdag Province, northwestern Turkey. The vessel, which was built in 2016, is sailing under the flag of the Bermuda.
It is expected to arrive in Turkey at 12.00 a.m. local time on Wednesday, Jan. 20.
Last week, oil prices gained more than eight per cent after Saudi Arabia said last Tuesday that it would unilaterally cut 1 million barrels per day (bpd) from its crude oil production levels in February and March, giving the market a very positive surprise at the end of the OPEC+ ministerial meeting.
But this week, news out of China and a rising U.S. dollar snapped oil’s winning streak.
In China, authorities reported on Sunday a doubling of the new coronavirus cases, which resulted in stricter restrictions on movement in the world’s largest oil importer.
China has so far supported the oil market and oil prices with its healthy crude demand, while Europe and the U.S. were on lockdowns. Parts of the new cases in China were imported, but nearly 50 were local transmissions, most of which in the Hebei province surrounding Beijing.
The authorities yesterday reported the largest daily rise in COVID cases in mainland China in over five months.
A rising U.S. dollar also weighed on oil prices as a stronger U.S. currency makes crude buying more expensive for holders of other currencies.
“Having broken above $56/bbl briefly on Friday, ICE Brent has come under some selling pressure this morning in Asia, with a stronger USD providing some resistance to the market,” ING strategists Warren Patterson and Wenyu Yao said.
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