Global Oil Steady As Inflation Spirals Than Expected

US natural gas prices hit a 40-month low last week at just $1.91 per mmBtu as the combined effect of mild weather, strongly rebounding production and sizable inventories continue to weigh on prices.

February to date, US population-weighted temperature has averaged 46 Fahrenheit, some 5 degrees above normal, whilst nationwide gas production rebounded from the cold snap to an average of 104.4 Bcf per day this month.

Milder-than-usual weather has also impacted natural gas inventories, with the most recent weekly data showing a meagre withdrawal of just 75 BCf, with current gas stocks 11% above the five-year average, reports OilPrice.com

Net positioning in the Henry Hub futures contract has been getting shorter for four consecutive weeks, with short positions held by hedge funds and other money managers exceeding long ones by 95,900 lots.

Higher-than-expected US inflation data have capped this week’s pricing upside as the Middle East continues to boil amidst several failed mediation attempts to bring about a ceasefire in the Israel-Palestine conflict. US CPI at 0.3% in January and 3.1% year-on-year does not bode well for interest rate hikes anytime soon and a potential crude inventory increase could start pushing crude prices lower, with Brent so far moving sideways at $82 per barrel.

In its Monthly Oil Market Report, OPEC kept its 2024-2025 demand projection unchanged, however curbed its non-OPEC supply forecast by 150,000 b/d to 70.55 million b/d, citing slower-than-anticipated production growth in the US and Russia.

The American Petroleum Institute filed a legal challenge to the Biden administration’s plan to limit the 2024-2029 Gulf of Mexico leasing plan to mere three sales (with none in 2024), arguing the White House limits access to energy.

Saudi Arabia’s energy minister Abdulaziz bin Salman said that the lowering of Saudi Aramco’s production capacity to 12 million b/d was driven by the need to develop renewable energies, and that its current 3 million b/d spare capacity is enough.

US shale specialist Diamondback Energy (NASDAQ:FANG) is set to close a deal to buy Endeavor Energy Resources in a $25 billion cash-and-stock transaction, creating the third largest Permian producer at a market cap of $50 billion.

Following its failed attempt to merge with Australian peer Santos (ASX:STO), energy major Woodside (ASX:WDS) said it remains open to acquisitions, rumoured to take a stake in Energy Transfer’s Lake Charles LNG project.

The Intercontinental Exchange has drastically cut initial margin requirements for coal derivative contracts by some 40%, with the margin for the API 2 benchmark now down to $11.06 per tonne, boosting its futures contracts’ liquidity.

The US Energy Information Administration predicts that shale production from the United States’ leading shale basins would increase by 20,000 b/d in March to 9.72 million b/d, almost completely driven by higher Permian output.

Equatorial Guinea’s most promising exploration project, a three-well campaign in Block G, was canceled due to “serious problems” with the project’s drilling rig, announced the same day that ExxonMobil confirmed it would exit the country.

Mexico’s state oil firm Pemex has been releasing large volumes of methane from its Zaap-C offshore platform even after the UN’s Methane Emissions Observatory warned Mexico of the ongoing plumes observed on 25 days last year.

India’s Bharat Petroleum Corporation (NSE:BPCL) is looking for oil and gas producing assets in Brazil and West Africa to supply its three refineries in Bina, Mumbai and Kochi, expanding the country’s upstream portfolio.

The blaze at BP’s (NYSE:BP) 440,000 b/d Whiting refinery in Indiana and its slower-than-expected restart scared portfolio investors last week as hedge funds sold a total of 62 million barrels in WTI futures contracts, the fastest rate since October.

As the share of Russian gas in Austria’s imports rose to a new record of 98% in December, its energy minister stated that it would consider taking radical steps such as unilaterally ending the country’s supply contract that runs until 2040.

Africa’s largest LNG project in development, Mozambique’s 18.1 mtpa Rovuma LNG terminal will only see a final investment decision in 2025, following years of delays caused by ISIS-linked insurgency in the region.

FOREX: Lagos Assembly Suggests Ways To Strengthen Naira

The Lagos State House of Assembly has decried the continued downward slide in the value of the naira against the dollar.

As at Tuesday, a dollar hovered between N1,474 and N1,500 and the lawmakers, at plenary, advised the federal government and the Central Bank of Nigeria (CBN) on some bold steps to take so as to shore up the value of the naira.

Part of the resolutions by the House was that the Federal Government should come up with a mechanism to reduce foreign trips for seminars and conferences by ministries and agencies adding that this should apply to states.

While stressing the need to strengthen security across the nation, the House also called on the CBN “to embark on sensitisation of Nigerians on the steps being taken by the apex bank to reduce the pressure on naira while informing on the expected roles of Nigerians at this time.”

A statement by Eromosele Ebhomele, Chief Press Secretary to the Speaker of the Lagos State House of Assembly, said the lawmakers urged that depositors of dollars in banks can be engaged for an acceptable arrangement where such funds can be utilised by the government to help reduce pressure on the naira.

Speaker of the House, Rt. Hon. Mudashiru Obasa, who presided over the sitting, lamented the disparity between the dollar and naira while commending the CBN for taking some measures with the hope that such actions would yield positive results.

Dr. Obasa, who further commended the National Assembly for inviting the CBN governor for discussion recently, said: “In my opinion, the CBN and government should embark on sensitisation and information dissemination to make people understand what the government is doing.

The pressure on the naira is too much, but the CBN should make sure that national interest is supreme.”

Obasa urged the government to regulate religious pilgrimages as they attract undue interest in dollars and put pressure on the naira. According to him, this action could be sustained until the naira stabilises.

“To save the naira, the federal government and states can stop foreign conferences and seminars. If possible, we can bring the resource persons to Nigeria to deliver their lectures. We all need to look inward to support the government.

“Locally, some people in Nigeria doing businesses demand dollars instead of naira. Even at parties now, you see people spray dollars instead of naira. We need a way out and to do this, we need the support of citizens. That’s the essence of sensitisation.”

Speaking earlier under ‘Matter of Urgent Public Importance’, Hon. Femi Saheed (Kosofe Constituency 2), said the current naira-dollar disparity is the direct consequence of the policies of the Godwin Emefiele-led CBN.

According to him, the naira will gain strength if measures including fixing the nation’s refineries, strengthening the education and health sectors are taken.

“I think the current CBN governor should work on moral suasion to get people to pull out the dollars in their domiciliary account,” he said.

About The Author