Month: March 2020

The U.S. sanctions on Iran’s oil sector are impacting the Islamic Republic’s ability to potentially increase production in the long term if the U.S.-Iran tensions subside and sanctions ease.  

Iran relies 100 percent on imports for oil rig equipment, but the sanctions have stifled such imports from the U.S. and Europe, Mohsen Mihandoust, a director at Iran’s Society of Petroleum Engineers, told Reuters in an interview published on Tuesday.

Due to the sanctions, at least a quarter of the oil rigs, or 40 out of 160, in Iran are now out of work—either idle or under repairs, Reuters reported, citing financial documents and sources in the industry.

Iran’s oil rigs will be inefficient or very old within the next five years, according to Reuters’ sources.

With the U.S. sanctions in place, Iran doesn’t have many options to repair rigs in the short to medium term because it cannot import spare parts.

Even in the event of the U.S. lifting the sanctions, Iran’s oil industry may need years to recover its oil production to levels last seen just before the sanctions were imposed in May 2018.

The U.S. sanctions on Iran’s oil industry and exports have significantly cut Iranian oil exports, as the United States ended in May last year all waivers for all of Iran’s oil buyers and is going after anyone dealing with Iranian oil.

Iran continues to export oil, using all back channels it can think of. However, the primary buyer of Iranian oil under the ‘no exemption’ sanctions, China, is experiencing an unprecedented slowdown in oil demand due to the coronavirus outbreak, so it’s not clear how much oil Iran can place with its key customer in the coming months.

Meanwhile, the U.S. is now going after Iran’s floating storage. Washington plans to issue warnings to oil shippers, insurers, and port authorities that storing Iranian crude oil will bring the wrath of U.S. sanctions, a U.S. State Department official said on Monday.

By Tsvetana Paraskova for Oilprice.com

Saudi Arabia’s state-run shipping company has hired multiple very large crude carriers to carry all the extra oil it plans on exporting next month—a rare move indeed for the shipping company that sports its own fleet of 41 tankers, according to Bloomberg sources.

Bahri, as the Saudi’s shipping company is known, has booked passage for its crude oil on three VLCCs, each with the capacity to haul 2 million barrels of crude. The preliminary bookings are heading to the US Gulf Coast, the sources say—but the bookings could still fail.

The extra VLCC charters are a logical step given Saudi Arabia’s professed plans to ramp up its crude production to more than 12 million barrels per day, after the OPEC+ fell apart last Friday when Russia refused to join in on additional production cuts.

Next month, Saudi Arabia has plans to increase shipments of crude to its prized market, Asia, who will be more than happy to take on more oil at the substantial discount that the Saudis are selling their oil for as part of its oil war strategy. However, trips from to the US take 40 days, and Bahir’s own tankers would not return to Saudi Arabia in time to load these extra volumes.

But all that could change in the blink of an eye.

The other active participant in the oil price war, Russia, said today that it had not ruled out yet the possibility of rekindling its love affair with Saudi Arabia by returning to cooperation with OPEC should necessity dictate. Russian oil companies and the Russian Oil Ministry will hold talks on Wednesday to discuss the matter, Reuters sources said on Tuesday.

By Julianne Geiger for Oilprice.com

With cost of governance remaining high and slump in revenue subsisting due to the volatility of oil prices at the international market, the Federal Government, yesterday, announced plans to cut its 2020 budget.
   
President Muhammadu Buhari, in December, signed a N10.59 trillion 2020 budget, on the assumption of oil production of 2.18 million barrels per day with an oil price benchmark of $57 per barrel.
   
However, oil prices had plummeted by over 25 percent, forcing future to its lowest in years, as Brent crude benchmark fell from $45 a barrel to $36.32 as at 6:00pm yesterday, while WTI fell from $40.45 to $32.97.

Latest projections by Goldman Sachs yesterday, showed that the oil market is heading into a whole different era now that Saudi Arabia and Russia are squaring off in an all-out oil price war following Friday’s failed OPEC+ agreement, thus making $20 Brent Crude a real possibility.

The Minister of Finance, Zainab Ahmed, speaking in Abuja after a meeting with Buhari, said a committee, including herself, the Minister of State for Petroleum Resources, the Group Managing Director (GMD) of the NNPC and the Central Bank governor would determine the size of the budget cut in the coming days and revisit the benchmark crude oil price of $57 a barrel used to calculate the budget.

However, the Lagos Chamber of Commerce and Industry (LCCI), through its Director-General, Muda Yusuf, said a fall in oil price has implications for the level of fiscal deficit in the budget, as its implementation would be constrained; infrastructure financing affected; borrowing might increase, and the capacity to fund capital project would be severely constricted.

With this scenario, the outlook for oil-dependent economies looks rather gloomy, he added.Oil prices plunged by 10 per cent on Friday after OPEC and its Russia-led non-OPEC allies failed to agree on how to handle the depressed demand amid the Coronavirus outbreak.

The Saudis and OPEC insisted on a massive 1.5-million-bpd cut through end-2020, but Russia refused to continue ceding more ground and market share to U.S. shale with the OPEC+ production cut deal, which hadn’t materially moved oil prices higher, especially with the slump in demand due to the epidemic.

As oil price yesterday collapsed to what could be described as the worst in about three decades due to rivalry between Saudi Arabia and Russia, industry analysts said Nigeria and the global economy might not recover quickly from the shocks.

source: Guardian

Acting Director-General of the Securities and Exchange Commission, SEC, Ms Mary Uduk, yesterday, disclosed that emergency measures needed to be put in place by the country to insulate the Nigerian economy against expected shocks caused by the falling crude oil prices and increasing spread of coronavirus.

Addressing newsmen in Abuja, on its forthcoming International conference on Nigeria’s Commodities Market, Uduk, stated that with the current state of things, Nigeria’s 2020 budget is already seriously threatened.

She maintained that the Nigerian capital market was not totally insulated from the global shocks, noting that the commission would continue to monitor developments in the global market to ensure that the effect on the Nigerian capital market was minimal.

According to her, the declining crude oil price if not properly managed, would affect Nigeria’s foreign exchange-earning ability and the capacity of the country to service its debts.

She called for a multi-sectoral approach towards addressing the challenges to ensure that the country does not plunge into another round of recession.

Uduk, however, commended efforts spearheaded by the Central Bank of Nigeria, CBN, noting that the apex bank needed to be supported by stakeholders across all sectors of the Nigerian economy in order to achieve meaningful results.More in Home

She said: “In CBN right now, the government has convened a conference that is looking at how this thing is affecting the economy of Nigeria. The budget 2020 is already seriously threatened because the country’s crude oil benchmark was at $57 per barrel, but as of last night when I was looking at a report on a news network, I saw that oil price had gone down to $31 per barrel. That is how bad it is.

“The government has to sit down and calibrate and look at what are the steps that are to be taken in order to avoid a recession if we are not already even there. And you know that will affect our ability to earn foreign exchange which is predicated on doing a lot of things. We have to service our debts and all of that.

“It does not just have to be one sector it has to be a concerted effort, all of our needs to sit down and say what can we do and right now as we speak it is been done in CBN.”

Uduk further stated that the forthcoming International conference on Nigeria’s commodities market was another platform for critical stakeholders to brainstorm on issues bothering on diversification of the Nigerian economy and the roles agriculture would play in insulating the Nigerian economy from the shocks in the global economy.

She commended the Federal Government’s efforts at diversifying the Nigerian economy and moving the country away from overreliance on one commodity, adding that agriculture remained an important part of that plan holding the potential of delivering on the country’s food security needs, providing jobs and increasing our foreign exchange earnings.

“The International Conference on Nigeria’s Commodities Market 2020 will gather relevant stakeholders in the commodities ecosystem to consider the most pertinent issues in growing the ecosystem in Nigeria, with the end goal of creating an enabling environment for the deployment of innovative solutions that improve processes, products, productivity, and the partnerships available in the market as well as enable investors to access various investment opportunities across the value chain,” the SEC boss noted.

Vanguard

(Bloomberg) — Nigeria may have to adjust its budget this year after fears of coronavirus pandemic dragged the price of crude under the target set in its 2020 spending plan.

“The current crude oil price of $53 a barrel is below the budget benchmark. So what we are doing is studying the situation. We are committed to doing a midterm review,” Zainab Ahmed, Nigeria’s Minister of Finance told reporters in Abuja, the nation’s capital.

Nigerian President Muhammadu Buhari signed the country’s 10.6 trillion naira ($29 billion) spending plan into law this year based on an crude price projection of $57 a barrel and targeted oil earnings of 2.64 trillion naira. Brent crude prices are down about 22% this year.

Africa’s largest oil producer relies on earnings from the black commodity for about 50% to 60% of its income and more than 90% of its export revenues.

The International Monetary Fund slashed the West African nation’s economic growth projection to 2% from 2.5% because of a decline in oil prices.

“We are not taking any measures now until we have a reasonable period within which we make a review and then we may need to do an adjustment to the budget through working together with the National Assembly,” she said.

(Adds projected oil earnings to third paragraph)

source:investing.com