Nigerian crude drew closer to the $90 per barrel mark once again as Middle East tensions increased and signs of a potential September rate-cut cycle emerged. At slightly higher than $88 a barrel, Nigeria’s Brass River, Bonny Light, and Qua Iboe are significantly more expensive than the current Brent contract.
Early on Monday, the price of U.S. West Texas Intermediate rose by 52 basis points to approximately $80.5 per barrel, while Brent’s price grew by more than 50 basis points to about $83 per barrel.
The Israeli military has attacked the Houthi rebels in Yemen, who receive support from Iran, using fighter jets. This comes after a Friday incident in which one person was killed when rebels used a kamikaze drone to breach Tel Aviv airspace for the first time.
Statements from Houthi official Mohammed Abdulsalam highlighting “brutal Israeli aggression against Yemen” kept oil prices high. He also affirmed that the Yemeni port of Hodeida, “fuel storage facilities, and a power plant” were struck by airstrikes “to pressure Yemen to stop supporting Palestinians in the Gaza war”.
The strikes by the Israeli Air Force were in retribution for the Houthi drone strike in Tel Aviv on Friday morning, which resulted in one death and eight injuries. The drone attack by the Houthis carried the possibility of “sparking escalation of warfare between Yemen’s Houthis, Hezbollah, and the State of Israel.”
Dovish U.S. Fed
The Federal Open Market Committee (FOMC) meeting on interest rates is scheduled for July 30-31, and investors anticipate that the Fed will maintain current rates during this meeting. However, traders will watch for any indications of a rate reduction later in the year.
U.S. President Joe Biden withdrew his bid for re-election on Sunday amid pressure from other high-ranking Democrats and supported Vice President Kamala Harris as the party’s nominee to challenge Republican Donald Trump in November.
China’s second-quarter GDP growth of 4.7%, slower than anticipated, raised questions last week about the nation’s oil consumption and is still impacting fossil fuel prices. China unveiled a policy statement on Sunday that outlined its goals, ranging from creating advanced industries to enhancing the business climate. However, analysts did not see any indications of impending fundamental changes in the world’s second-biggest economy.
Nigeria’s oil production is still below OPEC’s quota amid high rate of oil theft
The country’s present output makes it challenging to satisfy the 1.78 million barrels per day (including condensates) FG budget baseline and the 1.5 million barrels per day (OPEC) limit set for 2024.
The Nigerian Upstream Petroleum Regulatory Commission reports that the total amounts of condensates and crude oil produced in January, February, and March were 1.438 million, 1.539 million, and 1.643 million barrels of oil each month, respectively. Nigeria produced 1.27 million barrels per day in June, according to the Organization of the Petroleum Exporting Countries Monthly Oil Market Report.
Budgetary expectations have been upset by the low production. At least 80% of Nigeria’s foreign exchange earnings and 70% of its budget revenue come from crude oil and gas production. According to analysts, President Bola Tinubu must take decisive action to end large-scale stealing.
Participating in last week’s security meeting, NNPCL’s Group Chief Executive Officer (GCEO), Mele Kyari, acknowledged that pipeline vandalism and oil theft have turned into a national problem and that the president has ordered the CDS to stop these activities as soon as possible, “so that we can restore national production to the level the president and the country is expecting.”