WITH Saudi Arabia expressing its ability to raise oil production by two million barrels in obedience to pressures from US President Donald Trump, there are fears that Federal Government’s 2018 budget just recently signed by President Muhammadu Buhari may be in trouble.
The 9.1 trillion 2018 budget was predicated on a benchmark price of $51 per barrel and production of 2.3 million barrels per day.
Federal Government has also said that it needed oil to sell at $138 per barrel to be able to balance its budget as it also projected N1.95 trillion deficit in the budget.
An agency report on Tuesday indicated, however, that despite the US push on Saudi Arabia, futures in New York jumped as much as 1.7 per cent.
This was due to outages around the world from Libya to Canada and Venezuela are keeping priced elevated. The US. crude stockpiles, already the lowest since January, are expected to tighten further.
However, with Saudi Arabia, leader of the OPEC and non-OPEC coalition agreeing to tighten supply breaking the agreement, there could be an avalanche from other countries like Russia and Iran and Iraq already angling to increase its production.
Crude soared above $75 a barrel in New York for the first time since 2014 on signs global supply outages outweigh OPEC’s pledged production rise.
The market “is anticipating a very bullish number” in Thursday’s inventory report, Bob Yawger, director of futures at Mizuho Securities USA Inc. New York. “all eyes will be on that Cushing number.”
Oil is surging as the U.S. pushes allies to end imports of Iranian crude, as global supply disruptions persist and American crude inventories are already at the lowest since January.
Morgan Stanley raised its Brent crude forecast to $85 a barrel through to the third quarter of 2019, citing a tighter market than previously anticipated.
West Texas Intermediate crude for August delivery jumped $1.9 to $75.13 a barrel at 9:41 am. on the New York Mercantile Exchange.
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The premium of near-term U.S. oil over long-dated contracts increased as analysts forecast continued shrinking supplies in the key Cushing, Oklahoma, supply hub.
The prompt WTI spread was at $2.41 on Tuesday after closing at its widest since 2014 on Monday.
Brent for September settlement advanced $1.05 to $78.35 a barrel on the London-based ICE Futures Europe exchange. The global benchmark traded at a $5.64 premium to WTI for September.
U.S. crude stockpiles are forecast to have declined 5 million barrels last week, according to a Bloomberg survey ahead of government data released on Thursday.
Inventories at Cushing fell 2 million barrels last week, according to a separate forecast compiled by Bloomberg.
The industry-funded American Petroleum Institute will release its weekly tally of inventories later on Tuesday
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