Author: oilpriceng

As the world grapples with the latest crude oil crash caused by the Coronavirus (COVID-19) epidemic, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) Mr Mele Kyari, has urged Nigerians to brace up for an unsavory economic climate in the months ahead as the journey may not be rosy. 

This was even as he revealed that about 50 cargoes of crude oil were yet to find landing due to the outbreak of the virus.

Kyari, who made this known at the Central Bank of Nigeria (CBN)  RoundTable discussion in Abuja Wednesday, said the development implies that there are no off-takers for the vessels for now due to drop in demand.

“Today, I can share with you that there are over 12 stranded LNG cargoes in the market globally. It has never happened before. LNG cargoes that are stranded with no hope of being purchased because there is abrupt collapse in demand associated with the outbreak of Coronavirus,” Kyari submitted.

He said that in the face of the global pandemic, countries like Saudi Arabia have given discount of $8 and Iraq $5 to their off-takers in some locations meaning that when crude oil sells at $30 per barrel, countries like Saudi Arabia is selling at $22 per barrel and Iraq selling their crude at $25 per barrel.

He said this bumpy ride would be felt for up to three months, regardless of the improvement in crude oil price in the international market.

Speaking at the second edition of ‘Going for growth’, a consultative forum with the Central Bank of Nigeria (CBN) Governor, held in Abuja, Kyari noted that 12 cargoes of LNG were currently stranded across the world, with 50 Nigerian oil vessels roaming the international waters without any market to sell the product.

Kyari also noted that Nigeria’s challenges have been worsened by high cost of crude production, a development that threatens to evict the country out of the globally competitive sector.

He said: “When the oil market collapses,  everything collapses. It signifies the importance of the oil market.

Today, the best of our production system in Nigeria is $15-17 a barrel.

“So, there are many countries whose cost of production is $30 and we’re one of them. So, when the price now goes to $22 and we’re producing at $30, we’re out of business. Beyond that also, we have competition.

“But we have expectations and we have plans. The belief is that we can shift our reserves from 37-40 million barrels in the next two to three years. Inasmuch as our expectations are high, we must produce crude today even at low prices. The market operates in such a way that we don’t know what tomorrow will bring. The assumption for this year was $60 a barrel as an average.

“Now, we are faced with sub-$30 and potentially, we haven’t seen the bottom. We hope we’re seeing the bottom and if it is not, it’s a huge challenge that creates a cycle of problems for us and difficult to manage. It’ll affect all sectors. We don’t have the capacity to finance the oil and gas industry in this country. If we don’t do this and with the competing needs and resources across the world, what it means is that we cannot compete because nobody will want to put his money here.

“With the oil market slump on Monday, the realities on ground is beginning to dawn on us”  he stated.

In his remarks at the event, the CBN Governor, Mr Godwin Emefiele, said the apex bank was ready to intervene in the health sector following the outbreak of COVID-19.

According to him, plans are afoot to support the government by helping to develop specialist hospitals across the country.

He added that the bank’s intervention would be in the area of diagnosis and surgery, pointing out that this would reduce the foreign trip to oversea countries being embarked on by Nigerians in search of medical attention.

He said: “Given the impact of coronavirus, I heard some countries are trying to ban export of some pharmaceutical products, we must look inward at this time.

“CBN is also working to support the pharmacy and pharmacology industry” he said. On why Nigerians do not patronise made in Nigeria sanitisers, Emefiele urged people, owners of patent outlets and pharmacies to buy such products being produced in the country.

Source: The Sun

OPEC’s third biggest producer, the United Arab Emirates (UAE), is entering the oil price war as it has ordered its national oil producer to boost supply to the market to over 4 million bpd

OPEC’s third biggest producer, the United Arab Emirates (UAE), is entering the oil price war as the Abu Dhabi National Oil Company (ADNOC) said on Wednesday it was positioned to boost its supply to the market to over 4 million bpd in April, one million bpd higher than current production.

The UAE, which is OPEC’s third largest producer after Saudi Arabia and Iraq, has been pumping around 3 million bpd, in line with its commitment to stick to and even overcomply with the OPEC+ production cut deal, which fell apart last Friday.   

“In line with our production capacity growth strategy announced by the Supreme Petroleum Council, we are in a position to supply the market with over 4 MMBPD in April,” ADNOC Group chief executive, Dr. Sultan Ahmed Al Jaber, said in a statement.

ADNOC, which pumps nearly all the oil in the UAE, is also accelerating plans to increase its production capacity to 5 million bpd, Al Jaber said.

Commenting on the supply boost, Rystad Energy’s Bjoernar Tonhaugen said: ”We expected similar announcements from other core-OPEC members, such as the UAE today, that crude production and capacity will be ramped-up following Saudi Arabia’s announcement. We believe UAE can ramp up production to around 3.3-3.4 million bpd from their current output of ~3.0 million bpd in the short term, and will likely draw-down storage to supply clients additional barrels if there is enough demand for UAE barrels.

The 1-million-bpd supply increase from the UAE in April adds to the 2.6 million bpd which Saudi Arabia promised to unleash on the oil market next month, resulting in a total increase of 3.6 million bpd in global oil supply from OPEC’s heavyweights at a time of depressed oil demand due to the coronavirus outbreak and at a time of crashing oil prices, following the abrupt end to the OPEC+ deal last week.

Saudi Arabia’s oil giant Aramco will also begin to work on increasing its maximum sustainable capacity from 12 million bpd to 13 million bpd, as per Energy Ministry orders, the company said in a stock exchange filing on Wednesday.

“The Company is exerting its maximum efforts to implement this directive as soon as possible,” Aramco’s president and CEO Amin Nasser said in a statement carried by the Saudi Press Agency.

The promises of OPEC’s heavyweights to flood the market with oil were met by a Russian response that Moscow can raise its oil production by 200,000 bpd to 300,000 bpd in the short term, with a potential for up to a total increase of 500,000 bpd, as Russia also digs in for an oil price/market share war. The escalation in the promises for higher oil supply weighed on oil prices again on Wednesday after a brief respite on Tuesday. Early on Wednesday before the EIA inventory report, Brent Crude was plunging 3.4 percent at $35.95 and WTI Crude was down 3.26 percent at $33.24. 

By Tsvetana Paraskova for Oilprice.com

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