Brent climbs over $76/bbl, highest since October 2018
U.S. crude tops $74 for first time since October 2018
OPEC+ meeting on July 1 set to discuss further easing of curbs
MELBOURNE, June 23 (Reuters) – Oil prices rose on Wednesday, with Brent climbing above $76 a barrel to its highest since late 2018, after data showed U.S. crude inventories declined as travel picks up.
Meanwhile a week before the latest deadline to pass Nigeria’s long-awaited oil overhaul bill, demands for big changes, including from community leaders seeking an increased share of revenues, could push its passage into late this year, four sources told Reuters.
The last-minute wrangling over the package – which aims to modernise Nigeria’s petroleum industry and attract a shrinking pool of global fossil fuel investment dollars – has disappointed those who hoped the political alignment of the presidency and the National Assembly would break the cycle of failure that has stalked overhaul efforts for 20 years.
Among the changes are proposals to publicly sell shares in state oil company NNPC and implement market-based prices for gas to power.
At acrimonious meetings in the nation’s capital, Abuja, this week, community leaders revived demands to increase their share of petroleum produced in their regions to 10% – up from 2.5%.
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Communities with oil exploration in northern Nigeria’s Lake Chad region and the middle of the country are also seeking a greater share of oil revenues.
The National Assembly goes on recess in early July, so if the package is not approved within the next two weeks, it cannot become law until September.
Lagos-based consultancy Financial Derivatives Company Limited said the failure to pass an oil overhaul has cost some $15 billion annually in lost investment.
“With the global shift from fossil fuels to renewable forms of energy picking up pace, the passage of the (overhaul) may just be too little too late,” FDC wrote. “It is unlikely that Nigeria will be able to make up for either the lost time or the lost investment.”
Two sources, speaking on condition of anonymity, said Petroleum Minister Timipre Sylva had backed floating NNPC shares, which could allow the financially strapped company to raise money and operate more efficiently.
But the diminished state control that a float would bring is expected to scupper its chances.
Sylva also pressed for market-based prices for gas in the power sector, which experts say would boost investment in Nigeria’s sclerotic power sector. However, since the measure would also be likely to increase electricity prices, it too could fail.
A spokesman for Sylva did not comment on the proposed changes or expected passage of the bill.
Brent crude rose 38 cents, or 0.5%, to end the session at $75.19 a barrel.Its session high, $76.02 after the EIA data, was the highest since October 2018. U.S. West Texas Intermediate added 23 cents, or 0.3%, to settle at $73.08after hitting $74.25, also the highest since October 2018.
A retreat in the U.S. dollar has also boosted the price of crude, making it less expensive for buyers holding other currencies.
“The inventory relief could provide another reason for the OPEC+ alliance to boost production further from August, and the coming meeting next week is expected to be material for policy and prices going forward,” said Rystad Energy’s oil markets analyst Louise Dickson.
Brent has gained more than 45% this year, supported by supply cuts led by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) and as easing coronavirus restrictions boost demand. Some industry executives are talking of crude returning to $100 for the first time since 2014. read more
“Underlying demand in the physical market means that any corrections lower will remain shallow and short,” said Jeffrey Halley, analyst at brokerage OANDA.
OPEC+, which meets on July 1, has been discussing a further unwinding of last year’s record output cuts from August but no decision has been made, two OPEC+ sources said on Tuesday. read more
Global demand is set to rise further in the second half of the year, though OPEC+ also faces the prospect of rising Iranian supply if talks with world powers lead to a revival of Tehran’s 2015 nuclear deal. read more
Iran said on Wednesday the United States had agreed to remove all sanctions on Iranian oil and shipping, although Germany cautioned that major issues remained at talks to revive the deal. read more
“If indeed sanctions get lifted and Iran is free to boost production and exports, this may cause a price reaction, but still the growing demand will absorb the extra barrels and prices will not experience any major shock,” Dickson said.