A Review of the Nigerian Energy Industry

Brent rises above $103

OPEc oil28 June 2013, News Wires – Brent oil futures rose above $103 a barrel on Friday and are set for the first monthly rise in five months, after comments from Federal Reserve governors that the Fed is in no rush to scale back its massive bond-buying program.

The North Sea benchmark, however, is still on track for a third quarterly loss, the longest such streak since 1997/98, on persistent worries about the state of the global economy and its impact on oil demand.

The latest Fed comments appeased investors who had worried that the central bank would soon ease its unprecedented bond-buying stimulus programme, which could derail oil demand in the world’s largest oil consumer.

Brent crude oil futures gained 18 cents to $103 a barrel early on Friday, after falling to a session low of $102.44 earlier as investors sold off gains from the previous session.

US crude oil rose 11 cents to $97.16 a barrel.

“(Thursday’s) settlement price was slightly higher than expected without any bullish fundamental news but supported by comments by (the governors),” said Ken Hasegawa, a commodity sales manager at Newedge Japan.

“We will probably see some light profit-taking and short-covering today and I think the market will trade within a narrow range.”

Risk assets have been sold off since last week when Fed Chairman Ben Bernanke said the central bank expected to reduce the pace of bond buying later this year, and to end the program altogether by mid-2014, if the economy improves as expected.

The move comes amid lingering concerns over tight liquidity in China and a slowing economy which could impact oil demand in the world’s second-largest oil consumer.

China’s central bank is squeezing funds out of the money market, forcing banks to borrow money at historic interest rate levels, but the manoeuvre appears to have been calculated to have limited impact on the real economy.

“We may be seeing a little bit of positioning prior to China PMI data which is due on Monday as a recent slew of statistics from China point towards the fact that the risk is to the down side,” said Ric Spooner, chief market analyst at CMC Markets.

Growth in China’s factory sector may have stalled in June as domestic and external demand weakened, a Reuters poll showed, boding ill for broad economic prospects in the second half.

The median forecast of 12 economists polled by Reuters this week showed China’s official Purchasing Managers’ Index (PMI) likely touched 50 in June, from 50.8 in May.

Turmoil and outages in oil-producing regions also lent support to Brent. Libya’s defence minister will be removed from his post following fierce clashes between rival armed militias in the capital Tripoli, Prime Minister Ali Zeidan said on Thursday.

Output at Britain’s Buzzard oilfield in the North Sea is expected to stay at reduced levels of around 170,000 barrels per day for about five days, an industry source said on Thursday.

But large stockpiles in the US of crude and gasoline put a lid on oil price gains.

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