<h2 id="h-topline">TOPLINE</h2>



Ukraine’s suspension of Russian oil to Eastern Europe sent oil prices soaring Tuesday morning, after Russian oil company Transneft announced Ukraine had not received transfer fees for the oil for nearly a week due to Western sanctions, renewing fears of supply shortages.



<h2>KEY FACTS</h2>



<a href="https://www.marketwatch.com/investing/future/brn00?countrycode=uk" target="_blank" rel="noreferrer noopener">Brent Crude Oil</a>&nbsp;shot up 1.13% Tuesday morning, hitting $97.78 per barrel, while&nbsp;<a href="https://www.cnbc.com/quotes/@CL.1" target="_blank" rel="noreferrer noopener">West Texas Intermediate</a>&nbsp;increased 1.3%, to $92.06, following the announcement from&nbsp;<a href="https://www.forbes.com/companies/transneft/?sh=670e78d23771">Transneft</a>, Russia’s pipeline monopoly.



Transneft wrote in a statement obtained by <a href="https://www.reuters.com/business/energy/russia-suspends-oil-exports-via-southern-leg-druzhba-pipeline-due-transit-2022-08-09/" target="_blank" rel="noreferrer noopener">Reuters</a> that it had paid a transfer fee to Ukraine, but the money was returned because of European Union sanctions against Russia for its ongoing invasion of Ukraine.



Ukraine’s decision to halt Russian oil affects the southern leg of the Druzhba pipeline, which feeds Hungary, Slovakia and the Czech Republic, according to Transneft.



<a href="https://www.worldometers.info/oil/hungary-oil/" target="_blank" rel="noreferrer noopener">Hungary</a>’s oil reserves now sit at 28.6 million barrels, leaving it with enough oil for one year of consumption, while the&nbsp;<a href="https://www.worldometers.info/oil/czechia-oil/#:~:text=as%20of%202016).-,Oil%20Imports,barrels%20per%20day%20in%202016)." target="_blank" rel="noreferrer noopener">Czech Republic</a>&nbsp;has 15 million barrels (less than a year) and&nbsp;<a href="https://www.worldometers.info/oil/slovakia-oil/#:~:text=as%20of%202016).-,Oil%20Imports,barrels%20per%20day%20in%202016)." target="_blank" rel="noreferrer noopener">Slovakia</a>&nbsp;has 9 million barrels in reserves (less than a year), according to the site Worldometer.



The Czech Republic imported 3,417 kilotons (2.2 million barrels) of Russian oil in 2021, more than it imported from any other country, <a href="https://www.mpo.cz/en/energy/statistics/oil-and-oil-products/statistics-of-crude-oil-imports-to-the-czech-republic--260434/#:~:text=In%202021%2C%20crude%20oil%20was,oil%20pipelines%2C%20partly%20by%20rail." target="_blank" rel="noreferrer noopener">according to</a> Czech Ministry of Industry and Trade.



<h2>KEY BACKGROUND</h2>



The news came amid a steady two-month decline in gas prices, which had momentarily assuaged fears of a pending recession in Europe (Brent crude prices had been declining since it hit a $123.58 peak on June 22). The European Union has also been embracing a potential energy shortage as Russia threatens to cut off oil and gas supplies to the West. Speaking to member countries in a conference last month, European Union Commission President Ursula von der Leyen pushed for a&nbsp;<a href="https://www.forbes.com/sites/brianbushard/2022/07/20/russia-is-blackmailing-us-eu-plans-gas-reduction-as-putin-threatens-shutoff/?sh=2c8055492534">15% cut</a>&nbsp;in gas use through March, in response to a shutoff of Russian gas — which she called a “likely scenario.” The plea came a week after Russia&nbsp;<a href="https://www.forbes.com/sites/siladityaray/2022/07/11/russia-shuts-down-gas-pipeline-for-maintenance-europe-holds-breath-worried-it-wont-re-open/?sh=8597eeedd88e">shut down</a>&nbsp;the Nord Stream I pipeline for maintenance, sparking fears a routine measure could be prolonged into a long-term closure in response to Western sanctions. The pipeline has since been&nbsp;<a href="https://www.forbes.com/sites/roberthart/2022/07/21/russia-restarts-key-gas-pipeline-to-europe-after-fears-moscow-would-keep-taps-closed/?sh=68920e113a93">restarted</a>. In June, the EU&nbsp;<a href="https://www.csis.org/analysis/european-union-imposes-partial-ban-russian-oil#:~:text=A1%3A%20On%20June%203%2C%20the,as%20of%20February%205%2C%202023." target="_blank" rel="noreferrer noopener">adopted</a>&nbsp;a round of sanctions (the sixth overall) targeted at Russian oil, with embargoes starting Dec. 5 on crude oil, and Feb. 5, 2023 on petroleum products — with an exemption from oil imported via pipeline.



<h2>TANGENT</h2>



On Monday, the European Union&nbsp;<a href="https://www.theguardian.com/world/2022/aug/08/eu-submits-final-text-talks-2015-iran-nuclear-deal-revival-tehran-washington" target="_blank" rel="noreferrer noopener">released</a>&nbsp;a final draft to revive a 2015 nuclear deal with Iran, in hopes of restoring Iranian crude exports to 2018 levels, when former United States President Donald Trump reneged on the deal.



<h2>BIG NUMBER</h2>



250,000. That’s how many barrels of oil Russia typically supplies through the southern leg of the Druzhba pipeline per day, Reuters reported.



<h2>FURTHER READING</h2>



<a href="https://www.forbes.com/sites/ianpalmer/2022/07/28/russia-threatens-eu-reduces-us-industry-helps-to-untangle-the-natural-gas-war-in-europe/?sh=175004d12186">Russia Threatens, EU Reduces, US Industry Helps To Untangle The Natural Gas War In Europe.&nbsp;</a>(Forbes)



<a href="https://www.forbes.com/sites/brianbushard/2022/07/20/russia-is-blackmailing-us-eu-plans-gas-reduction-as-putin-threatens-shutoff/?sh=2c8055492534">‘Russia Is Blackmailing Us’: EU Plans Gas Reduction As Putin Threatens Shutoff</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/dereksaul/2022/07/22/germany-bails-out-energy-giant-uniper-in-latest-sign-of-deepening-european-energy-crisis/?sh=800273a53ad8">Germany Bails Out Energy Giant Uniper In Latest Sign Of Deepening European Energy Crisis </a>(Forbes)



By Brian Bushard, Forbes Staff

Oil Prices Moving Down

Oil Prices Jump As Russian Oil Supplies Halted To Eastern Europe

<h2 id="h-topline">TOPLINE</h2>



Global stock indexes and major cryptocurrencies dived on Thursday while commodities like oil and precious metals rallied as Russia’s&nbsp;<a href="https://www.forbes.com/sites/joewalsh/2022/02/23/russia-orders-special-military-operation-in-ukraine/?sh=72e111fc2321">invasion</a>&nbsp;of Ukraine sent shockwaves through international markets.&nbsp;



<h2 id="h-key-facts">KEY FACTS</h2>



European stocks tumbled as markets opened on Thursday morning, with key indexes including London’s FTSE 100 down 2.46%, Germany’s Dax 3.48%, France&#8217;s CAC40 3.01%, Spain’s Ibex 2.58%, Euronext 100 2.62% and Euro Stoxx 50 3.37%.



The slump mirrors falling stocks in the Asia Pacific region Thursday, with Japan’s Nikkei down 1.81%, Hong Kong’s Hang Seng 3.21%, Australia’s All Ordinaries 2.95% and Shanghai’s Composite 1.70%.&nbsp;&nbsp;&nbsp;



U.S. markets are on a similar path for when markets open, with the Dow down 1.38% in pre-market trading, Nasdaq 2.57% and S&amp;P 500 1.84%, with the latter&nbsp;<a href="https://www.forbes.com/sites/sergeiklebnikov/2022/02/23/sp-500-falls-deeper-into-correction-territory-as-ukraine-declares-state-of-emergency/?sh=793035b35e67">continuing</a>&nbsp;a days-long downwards trend.



The Moscow stock exchange, which uses the Russian ruble, suspended all trading Thursday amid enormous volatility in the currency and benchmark index MOEX was down nearly 40%.



Oil prices, meanwhile, jumped past $100 a barrel with the highest prices since 2014—Brent crude rose nearly 7% to $103 a barrel—and safe haven&nbsp;<a href="https://www.reuters.com/markets/europe/gold-rises-escalating-ukraine-crisis-spurs-safe-haven-bids-2022-02-24/" target="_blank" rel="noreferrer noopener">assets</a>&nbsp;like gold, silver platinum and palladium grew between 1.5% and 3%.&nbsp;&nbsp;&nbsp;&nbsp;



Major cryptocurrencies also crashed in the wake of the invasion, with&nbsp;<a href="https://www.forbes.com/digital-assets/assets/bitcoin-btc/?sh=23274a6d4357">bitcoin</a>&nbsp;<a href="https://www.forbes.com/sites/siladityaray/2022/02/23/bitcoin-falls-below-35000-as-putin-orders-military-operation-in-ukraine/?sh=56d6315f4a3a">down 8%</a>&nbsp;in the last 24 hours,&nbsp;<a href="https://www.forbes.com/digital-assets/assets/ether-eth/?sh=6457a2717b0e">ether 12%</a>, Binance’s&nbsp;<a href="https://www.forbes.com/digital-assets/assets/binance-coin-bnb/?sh=6b8afc44ae78">BNB 11%</a>&nbsp;and&nbsp;<a href="https://www.forbes.com/digital-assets/assets/ripple-xrp/?sh=38a7ebe1535a">Ripple’s XRP 13%</a>.&nbsp;&nbsp;



<h2 id="h-what-to-watch-for">WHAT TO WATCH FOR</h2>



More sanctions. World leaders have&nbsp;<a href="https://www.forbes.com/sites/dereksaul/2022/02/23/russia-sanctions-tracker-first-barrage-of-penalties-span-japan-to-us/?sh=3379f45c149a">already imposed fresh sanctions</a>&nbsp;on Russian banks, lawmakers and oligarchs and President Joe Biden warned Thursdays’ G7 meeting would yield more “<a href="https://www.forbes.com/sites/siladityaray/2022/02/24/russias-invasion-of-ukraine-draws-international-condemnation-and-threats-of-more-sanctions/?sh=3f2fd15c7b3b">severe sanctions</a>’ on Russia.&nbsp; The sanctions—which could be severe given the scale of Russia’s incursion—could cripple Russia’s economy and bar it from key markets. European&nbsp;<a href="https://www.politico.eu/article/eu-russia-new-sanctions-package-ukraine/" target="_blank" rel="noreferrer noopener">leaders</a>&nbsp;have already scheduled an emergency meeting to discuss the measures on Thursday evening.&nbsp;



<h2 id="h-further-reading">FURTHER READING</h2>



<a href="https://www.forbes.com/sites/siladityaray/2022/02/24/russias-invasion-of-ukraine-draws-international-condemnation-and-threats-of-more-sanctions/?sh=3f2fd15c7b3b">Russia’s Invasion Of Ukraine Draws International Condemnation And Threats Of More Sanctions</a>&nbsp;(Forbes)



<a href="https://www.forbes.com/sites/joewalsh/2022/02/23/russia-orders-special-military-operation-in-ukraine/?sh=72e111fc2321">Russia Orders ‘Special Military Operation’ In Ukraine</a> (Forbes)



By <a href="https://www.forbes.com/sites/roberthart/"></a>Robert Hart, Forbes Staff

Global Stocks Plummet And Oil Soars As Russia Invades Ukraine

After record production cuts in April intended to prop up the market amid a demand crisis caused by the coronavirus pandemic, the world’s largest oil producers are <a rel="noreferrer noopener" href="https://www.nytimes.com/2020/07/12/business/economy/opec-russia-oil-production-coronavirus.html" target="_blank">expected</a> to ease up on the restrictions and begin to increase their output next month.



KEY FACTS



<ul><li>Saudi Arabia, Russia, and the other members of OPEC+ will meet Wednesday to discuss the current market situation and debate future production limits, the Wall Street Journal <a rel="noreferrer noopener" href="https://www.wsj.com/articles/opec-allies-set-to-ease-oil-cuts-seeing-pandemic-recovery-11594510347" target="_blank">reported</a> over the weekend, adding that most delegates in the organization support loosening restrictions.</li></ul>



<ul><li>As lockdown measures ease across the globe, demand for oil is slowly beginning to rise again as shipping and air travel resume. </li></ul>



<ul><li>Oil prices are still down significantly from pre-pandemic levels, however, with the Brent international benchmark priced at about 30% of January levels. </li></ul>



<ul><li>The International Energy Agency said Friday that while global demand for oil had recovered strongly in China and India in May, world demand is still projected to decline during the second half of the year before recovering in 2021. </li></ul>



<ul><li>The recent spike coronavirus cases and new lockdowns are creating “more uncertainty”: additional lockdowns could discourage travel and international trade, which would put more downward pressure on prices.</li></ul>



<ul><li>The risk to the oil market is “almost certainly to the downside,” the IAE said. </li></ul>



KEY BACKGROUND



In April, the members of the Organization of Petroleum Exporting Countries (OPEC) and its allies&nbsp;<a href="https://www.forbes.com/sites/sarahhansen/2020/04/09/saudi-arabia-and-russia-agree-to-historic-oil-production-cuts-but-they-may-not-be-enough-to-rescue-the-market/#63cf1d8c641a">agreed to record oil production cuts</a>&nbsp;of 9.7 million barrels a day as the coronavirus decimated global demand for crude oil. The agreement put an end to a weeks-long price war between Russia and Saudi Arabia that added even more pressure to an already-struggling market.&nbsp;



CRUCIAL QUOTE



“If OPEC clings to restraining production to keep up prices, I think it’s suicidal,” a person familiar with Saudi Arabia’s thinking told the Journal. “There’s going to be a scramble for market share, and the trick is how the low cost producers assert themselves without crashing the oil price.”



 &#8211; <a href="https://www.forbes.com/sites/sarahhansen/">Sarah Hansen</a>, Forbes Staff, <a href="https://www.forbes.com/markets">Markets</a>

Preis für Rohöl an der Börse

OPEC And Its Allies Are Ready To Boost Production, But Here’s Why An Oil Market Recovery Isn’t Guaranteed

TOPLINE: After months of sagging demand and wild swings in prices that at one point fell below zero, oil has now seen five straight days of gains as economies slowly reopen and traders bet on a comeback.



<h4>KEY FACTS</h4>



U.S. oil prices jumped nearly 20% on Tuesday, with the June futures contract for West Texas Intermediate crude reaching $24.56 on its fifth straight day of gains.&nbsp;



Last month, futures prices for the May WTI contract&nbsp;<a href="https://www.forbes.com/sites/sarahhansen/2020/04/21/heres-what-negative-oil-prices-really-mean/#4c6a349d5a85">plunged into the negative</a>&nbsp;for the first time in history as demand cratered and storage space filled up.&nbsp;



Brent crude, the international benchmark, saw a bump of almost 14% on Tuesday and settled at $30.97 per barrel.&nbsp;



Prices are responding to a slow uptick in demand: As some states and cities take cautious steps towards reopening, and as Europe and China return to work, investors are optimistic that restrictions on travel and movement will continue to ease.&nbsp;



At the same time, global oil production is dropping thanks to a deal between OPEC and its allies last month to reduce collective output by some 10 million barrels per day.



Some American producers have also taken steps to slow down production; last month, ConocoPhillips said it would cut&nbsp;<a href="http://www.conocophillips.com/news-media/story/conocophillips-to-voluntarily-curtail-225-000-gross-barrels-of-oil-per-day-reduces-2020-cash-uses-by-additional-3-billion-for-total-reduction-of-over-5-billion/" target="_blank" rel="noreferrer noopener">225,000 barrels per day</a>.&nbsp;



<h4>CRUCIAL QUOTE</h4>



“The reopening of economies has injected a degree of cautious optimism back into an oil market that plunged to historic lows only weeks ago,” RBC analyst Michael Tran&nbsp;<a href="https://www.cnbc.com/2020/05/05/oil-jumps-13percent-in-fifth-day-of-gains-on-demand-recovery-and-production-cuts.html" target="_blank" rel="noreferrer noopener">said</a>&nbsp;in a client note.



<h4>BIG NUMBERS</h4>



Last week, ExxonMobil&nbsp;<a href="https://www.forbes.com/companies/exxon-mobil" target="_blank" rel="noreferrer noopener">XOM</a>&nbsp;reported its&nbsp;<a href="https://markets.businessinsider.com/news/stocks/exxonmobil-q1-earnings-first-loss-decades-oil-market-price-plunge-2020-5-1029155170" target="_blank" rel="noreferrer noopener">first quarterly earnings loss</a>&nbsp;since 1988 and cut its spending by $10 billion. Two weeks ago, BP saw its&nbsp;<a href="https://www.cnbc.com/2020/04/28/bp-earnings.html" target="_blank" rel="noreferrer noopener">quarterly profit fall 67%</a>&nbsp;compared to the same period last year.&nbsp;



<h4>TANGENT</h4>



International oil hasn’t been hit nearly as hard as its American counterpart by the coronavirus crisis. The reason for the difference boils down to storage: Brent crude is priced in the middle of the North Sea, where tanker storage is ample and accessible, while WTI oil storage in the U.S. is limited and hard to reach. As a result, Brent is more removed from the coronavirus demand shock while WTI prices are much more sensitive to it.



<h4>WHAT TO WATCH FOR</h4>



Despite the major production cuts, the oil market is still under pressure and the next few weeks are likely to reveal more weakness. “The existing problems did not magically get resolved, the storage constraint is still there, but a couple of weeks away, so we will see its effect on prices soon, as the market will get tight,” <a rel="noreferrer noopener" href="https://www.barrons.com/articles/home-price-growth-could-slow-to-a-crawl-51588630813" target="_blank">writes</a> Per Magnus Nysveen, head of analysis at Rystad Energy. 



&#8211;<a href="https://www.forbes.com/sites/sarahhansen/">Sarah Hansen</a>, Forbes Staff, <a href="https://www.forbes.com/markets">Markets</a>

The Index of Oil. Up.

Why Are Oil Prices Rebounding?

Recovery in oil prices will depend on recovery in the global economy, says Annabel Bishop, Chief Economist at Investec in Johannesburg.



The recent collapse in the WTI (West Texas Intermediate) oil price has added to negative market sentiment, in an environment where risk aversion was already at high levels. Worsening forecasts of the economic impact of Covid-19 has been a key driver of the elevation in risk aversion in global financial markets, with the global recession expected to be deep and lengthy.



The crisis is unprecedented, and there is no certainty of its length and duration, or the impact it will have. Uncertainty heightens risk aversion in financial markets and the deep recessions forecast around the globe exacerbates risk-off sentiment. Risk aversion in financial markets would indeed be exacerbated further if economic growth forecasts for advanced economies weaken substantially further, and/or if uncertainty around Covid-19 intensifies instead of waning.



While this is not expected, should the path of the pandemic change, the discovery of vaccines and treatment/s be seen to be substantially delayed, the extent of disruptions to supply chains and production substantially greater than anticipated and/or policy responses viewed as insufficient, risk-off in global financial markets could escalate substantially further.



The severe negative impact on health in the United States, as fatalities and infections rise, has likely also been extremely negative for financial markets’ sentiment, with the world’s largest economy expected to see a deep recession this year (-5.9% y/y IMF), and with the negative impacts leaching into next year as well.



Financial markets are still at weak levels, and are likely to remain volatile and weak in the near term until evidence for the beginnings of a recovery in the global economy become clearer.



The collapse in the WTI oil price has come as chronic oversupply of oil has occurred. Storage facilities are close to capacity, inventories are very high, and demand is extremely weak. While WTI was negative yesterday morning at -$4.4/bbl, with pricing on May futures, (with suppliers essentially paying to have deliveries taken off their hands), the Brent crude oil price was at $23.8/bbl. It was expected that soon the WTI pricing would revert to June futures and as a result, the WTI price move back towards that of Brent – this has been in the process of beginning to occur this afternoon as US markets have opened. However, the Brent crude oil price has weakened with its pricing also determined by future contracts. Storage facilities are near full capacity, and demand is exceptionally weak, and production capacity has not been reduced instantly as this is not possible.



WTI and Brent are one of the two main benchmarks for oil prices worldwide, Brent is North Sea crude oil essentially, WTI Texas crude oil, both are light sweet crude oils. The quoted prices are influenced by the futures prices, as noted above, which have collapsed and oil prices in the immediate term are likely to be suppressed. While there are a number of other issues besetting the pricing WTI as well, the prices are not expected to lift until substantial supply cuts occur and demand increases notably. While oil importers will gain, and oil exporters lose substantial revenues, the recovery in oil prices will depend on the recovery in the global economy.



The IMF highlights that “(a) partial recovery is projected for 2021, with above trend growth rates, but the level of GDP will remain below the pre-virus trend, with considerable uncertainty about the strength of the rebound. Much worse growth outcomes are possible and maybe even likely. This would follow if the pandemic and containment measures last longer”. This signals a suppressed view for oil prices for some time.

oil pumps at sunset,  industrial oil pumps equipment.

Oil’s Not Well: ‘Global Recession Expected To Be Deep And Lengthy’

As Winston Churchill said, ‘to improve is to change’. Arise West Africa! Endowed with mineral wealth, if it is to improve economically the region must change and begin to aggressively develop and industrialize the sectors at its disposal.
Current economic ramifications in Nigeria are predicated on the 60% drop in the oil price. Sierra Leone too has suffered with the price of its biggest export earner, iron ore, falling 50%. As global demand for iron ore slows, the commodity has traded at record lows and has seen mining companies in Sierra Leone enter administration or close down.
When you consider the dependency these countries have on the resources and the lack of industry to develop them, governments are effectively playing Russian roulette with their economies. How then can countries learn from these lessons? The impact Ebola continues to have on West Africa is still prevalent. The mining sector saw many casualties, both human and economic, with the closure of several mines seen as an effective way to reduce the spread of the disease.
In Nigeria, a lack of refineries operating at maximum capacity proves that even if mineral rich countries are successful in extracting their resources, their ability to develop the infrastructure needs to be made a priority. In order to attain maximum value, every facet of the value chain in the industrialization process must be fully operational. The added value from the finished products made from the mined minerals will be greater, not only in terms of export value but also from the job creation and socio-economic development aspect. There is a widespread belief that the falling oil price makes a mockery of the Nigerian economy. It is rather an opportunity for diversification. However, there is a fervent danger of getting caught up in economic theory without implementing it.
To progress, the mining sector needs to solve infrastructural challenges. West African Exploration, a subsidiary of Sable Mining Africa, recently signed an infrastructural development agreement with the Liberian government. This will create employment, development and significant tax income. We are seeing the inner workings of getting it right. Africa, once seen as blank canvas for foreign companies to paint their pseudo-colonial economic activities, is now beginning to take a stand.
Mining opportunities in Nigeria are vast. The high costs involved present a barrier to entry and with those high costs patience is required. Exploratory costs are not always recouped. Therein lies an opportunity for any shrewd investor to assemble a team of competent geologists to determine the value of the vast mineral reserves. Notwithstanding the current security issues in the northern Nigeria, there are a growing number of opportunities for investors to pursue. The mining sector is crucial to Nigeria realizing its true economic potential.
Many western mining giants maintain a stranglehold on the continents mineral resources. Ghana’s success with its mining sector is partly due to an effective framework that involves paying a 5% mining royalty to the government. For many other countries in the region, a lack of technical expertise remains the biggest problem, thus there is a tendency to worship Western companies instead of seeing them for what they are; partners in achieving a common goal – economic development. A symbiotic relationship is required between investors and governments. Governments need assurance that investors are ethical and responsible and investors need confidence that governments will provide the necessary support in terms of regulation and licensing as well as attractive tax breaks and more importantly reduce the bureaucratic bottlenecks.
Despite the lack of geological data, there is growing rhetoric from representatives of governments for investors to engage in the development of the sector. Policy reformations are a step in the right direction. However, one sincerely hopes that this translates into practical, hands-on solutions. Only then will we see the sector really take off. If industry is the lifeblood of an economy, the mining sector is the transfusion needed to keep Nigeria PLC going.

Tag: Oil price

FORBES AFRICA SOCIAL MEDIA

Oil Prices Jump As Russian Oil Supplies Halted To Eastern Europe

Global Stocks Plummet And Oil Soars As Russia Invades Ukraine

OPEC And Its Allies Are Ready To Boost Production, But Here’s Why An Oil Market Recovery Isn’t Guaranteed

Why Are Oil Prices Rebounding?

Oil’s Not Well: ‘Global Recession Expected To Be Deep And Lengthy’

Nigeria needs a blood Transfusion