Can oil prices recover amid demand outlook?
Oil prices are trading near lowest levels since early June as concerns about demand in China balance prospects of lower U.S. crude and product inventories. Meanwhile, analysts say OPEC+ ministerial meeting on Thursday is unlikely to recommend changing the group's output policy, including a plan to start unwinding one layer of oil output cuts from October. Chinnan Dikwal, Vice Chair of African Energy Council joins CNBC Africa to discuss drivers shaping the global oil price outlook.
Wed, 31 Jul 2024 00:18:06 GMT
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AI Generated Summary
- Geopolitical tensions and events like the Gaza war and Golan Heights attack are contributing to oil price volatility, with Brent currently at $75 per barrel.
- Anticipation of a Federal Reserve rate cut in the U.S. could boost crude demand, leading to a potential price increase.
- OPEC Plus expected to maintain output policy, while countries like Nigeria face challenges meeting production quotas and improving infrastructure.
Oil prices have been fluctuating recently, trading near the lowest levels since earlier last month due to concerns about demand in China and prospects of lower U.S. crude and product inventories. Analysts forecasted oil to range between $85 to $90 in the second half of the year, but Brent is currently hovering around $75. Chinnan Dikwal, Vice Chair of the African Energy Council, sheds light on the factors influencing these price movements. The ongoing war in Gaza, recent Golan Heights attack, and geopolitical tensions have heightened market expectations. The response from key players like Israel and concerns over a potential conflict in the Middle East have contributed to Brent's volatility. However, the anticipation of a Federal Reserve rate cut in the U.S. could boost crude demand, pushing prices upwards. China's slowing demand and lower than expected U.S. crude stockpiles add to the market's complexity. OPEC and IEA provide differing outlooks on oil demand for the year, with OPEC projecting a rise to $86 per barrel. Dikwal aligns with IEA's view that prices might increase in the short term, driven by geopolitical events and potential Fed rate cuts. OPEC Plus is expected to maintain its output policy, monitoring market dynamics closely without immediate changes. Despite some members performing well, others like Nigeria face challenges meeting production quotas. Nigeria's current output stands at 1.27 million barrels per day, well below OPEC's 1.5 million quota. Dikwal believes Nigeria could produce up to 2 million barrels a day with improved infrastructure and anti-theft measures. The country's refineries aim to reach 85% capacity by year-end. The recent decision to sell crude in Naira supports domestic production and reduces reliance on imports, addressing fuel queue and FX pressure issues. However, the impact of rising global oil prices on local pump prices remains a concern. Government subsidies might shield consumers from price fluctuations, but could strain the budget. Dikwal's insights highlight the complexities of the oil market and the challenges and opportunities facing key players like Nigeria amidst global uncertainties.
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