A Review of the Nigerian Energy Industry

Brent holds near $100

Brent crude oil02 May 2013, News Wires – Brent oil steadied near $100 per barrel on Thursday, holding close to two-week lows hit in the previous session, as growing worries about the US and Chinese economies muddied the outlook for oil demand from the top two consumers.

According to Reuters, aata on Wednesday showed that US manufacturing growth had slowed last month, underlining worries that the number one economy had cooled as the second quarter got underway. Manufacturing orders in China also dropped unexpectedly, casting concerns about growth in one of the world’s top commodities consumers.

The data triggered a commodities sell-off on the first trading day of May, although a pledge by the US Federal Reserve to stick to its monetary stimulus plan has provided some support.

Brent, which fell more than 2% on Wednesday, edged up 11 cents to $100.06 per barrel early on Thursday morning after hitting a low of $99.51 – just shy of the prior session’s trough of $98.76.

US crude was 18 cents lower at $90.85 per barrel, extending losses into a third straight session, hurt by a build-up in US crude stockpiles.

Data from the Energy Information Administration showed US crude stocks rising 6.7 million barrels to a record 395.3 million in the week to 26 April, far exceeding forecasts of a 1 million-barrel build.

“It all comes down to demand; we are oversupplied at the moment because consumption levels have just not picked up. The assumption is we should be seeing demand growing at a much stronger pace at this point of the year,” Reuters quoted Houston-based Oil Outlook and Opinions president Carl Larry as saying.

“The confluence of bad economic data and these latest stock builds will continue to weigh on prices.”

On Wednesday, the US Institute for Supply Management said its index of national factory activity fell to 50.7 from 51.3 in March and its employment index fell to 50.2 from 54.2.

China’s official purchasing managers’ index (PMI) fell to 50.6 in April from an 11-month high in March of 50.9. Analysts had expected the April PMI to be 51.0.

“When you look at these numbers it shows growth, and that is really better when you compare it to what is going on in Europe,” Larry said.

“But the market is getting anxious as expectations are for these economies to be climbing a lot faster at this point in the year than they are.”

Another key US economic indicator investors will be watching out for is Friday’s non-farm payrolls.

“If we get a bad number here then you can probably expect to see either the Federal Reserve or the President come out to talk about growth stability in the US,” Larry said.

Reuters cited the Fed saying on Wednesday that it would continue to buy $85 billion in bonds each month to keep interest rates low and spur growth. It added it would step up purchases if needed to protect the economy.

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