Extracted From This Day Live
Oil price slump: OPEC gains upper hand as
US rig count slumps
Chineme Okafor in Abuja with agency
report
In response to the slump in crude oil prices in
the international market, the federal
government has announced a corresponding
reduction in the pump price of petrol from
N97 a litre to N87 a litre.
Making this known last night, the Minister of
Petroleum Resources, Mrs. Diezani Alison-
Madueke, said the price cut took effect from
midnight on Sunday.
In a statement, the minister said: “As you
may be aware, there has been a lot of
volatility in the oil market in the past few
months and due to this the importation
prices of our petroleum products have been
impacted.
“Therefore, with the approval and directive of
Mr. President and by virtue of Section 6
clause 1 of the Nigerian Petroleum Act, it is
my responsibility as Minister of Petroleum
Resources to hereby announce a reduction in
the pump price of Premium Motor Spirit
(Petrol) from N97 per litre pump price down
to N87 per litre pump price, effective from
twelve (12) midnight Sunday, 18th of January
2015.”
The Department of Petroleum Resources
(DPR) and the Petroleum Products Pricing
Regulatory Agency (PPPRA) have been
mandated to ensure compliance.
The federal government has been under
pressure from the All Progressives Congress
(APC) and the public to reduce the price of
petrol, arguing that subsidy on the
commodity was eliminated once oil prices fell
below $70 a barrel.
THISDAY had also exclusively reported as far
back as October that with the oil price slump,
the federal government would have to either
remove the subsidy on petrol or lower the
official price of the commodity.
In a related issue, crude oil drillers in the
United States (US) have taken a record
number of oil rigs out of service in the past
six weeks as member countries of the
Organisation of Petroleum Exporting
Countries (OPEC) keep their oil production at
30 million barrels per day (mbpd), thereby
sending prices tumbling to below $50 a
barrel.
The US oil rig count has fallen by 209 since
December 5, 2014, the steepest six-week
decline since Baker Hughes Inc. (BHI) began
tracking the data in July 1987, reported
Bloomberg yesterday.
Market reports said that the count was down
55 this week to 1,366 and horizontal rigs
used in US shale formations that account for
virtually all of the nation’s oil production
growth fell by 48, the biggest single-week
drop.
Bloomberg quoted analysts, including HSBC
Holdings Plc, as stating that the decline
showed that OPEC countries are winning the
fight for market share and slowing the growth
that has propelled US oil production to the
highest in at least three decades.
OPEC’s decision at its 166th General Meeting
in Vienna last November not to curb its
production output amid increasing supplies
from the US and other non-OPEC countries
has driven global oil prices down 58 per cent
since June.
“OPEC’s strategy is working, and it will be
obvious in US production by mid-year when
growth from shale players will come to a
halt,” James Williams, president of energy
consulting company WTRG Economics in
London, Arkansas, was quoted to have said
by telephone to Bloomberg, adding: “You can
imagine the impact on any industry from a
50 per cent impact on sales.”
Nigeria, like most OPEC countries, has been
impacted by the drop in the price of crude
oil. However, OPEC member countries like the
United Arab Emirates (UAE) and Saudi Arabia
have maintained that it was up to shale oil
producers and not OPEC to cut production.
While the West Texas Intermediate for
February delivery rose $2.44 on Friday to
settle at $48.69 a barrel on the New York
Mercantile Exchange, up 33 cents for the
week, the first gain since November, Brent,
the international benchmark, rose $1.90 to
end the day at $50.17 on the London-based
ICE Futures Europe Exchange, a weekly gain
of 6 cents for the front-month contract.
“Prices are being forced towards levels that
would force outright shut-ins in high-cost
areas, mainly in Canada and the US,” Societe
Generale SA (GLE) analysts including Mark
Keenan, its head of commodities research for
Asia in Singapore, said in a research note.
However, the slump in oil rigs is yet to stop
the unprecedented growth in US oil
production, which added 60,000 barrels a day
in the week ended January 9 to 9.19 million,
the US Energy Information Administration
data has shown.
Bloomberg also reported that projects are
being cancelled and budgets cut around the
globe. For instance, Royal Dutch Shell Plc
was reported to have called off a $6.5 billion
project in Qatar, while contract drillers
Helmerich & Payne Inc. (HP) and Pioneer
Energy Services Corp. (PES) lost US rig
contracts.
Mexican oil service companies also cut more
than 10,000 people and Suncor Energy Inc.
(SU) fired workers in Canada.
HSBC analysts, including Gordon Gray, said
in a research note that “we are seeing
leading indicators of weak prices starting to
drive the rebalancing that OPEC is seeking to
achieve”.
Rigs drilling for natural gas in the US also
dropped by 19 to 310 and inventories of the
heating fuel in the lower 48 states totalled
2.853 trillion cubic feet last week, 11 per cent
above year-earlier levels
Bloomberg however records that natural gas
for February delivery on Friday dropped 3.1
cents to settle at $3.127 per million British
thermal units on the NYMEX, down 29 per
cent in the past year.
Subscribe to:
Post Comments (Atom)
Your Comments Are What Shows Us How You Feel About The Topic. Join us on Facebook http://facebook.com/nigeriannewsreporters and Twitter @ngnewsreporters