A Review of the Nigerian Energy Industry

Brent holds above $103

China manufacturing01 September 2014 – Brent crude held steady above $103 a barrel on Monday, as a recent rebound in oil prices was checked by fresh data suggesting a slowdown in China’s factory activity.

Oil prices on both sides of the Atlantic registered a second straight month of losses in August, although prices gained about $1 a barrel towards the end of the month.

Growth in China’s factory sector slipped to a three-month low in August as foreign and domestic demand cooled, an HSBC survey showed on Monday. That may strengthen fears of a slowdown in demand for commodities, including oil.

“A fair bit of weak sentiment around China has already been priced in,” said Ankit Pahuja, a commodity strategist at ANZ investment bank.

“China has held to a 7.5% growth target, so the government does have plans to maintain growth across the next couple of quarters,” Pahuja said.

Brent crude for October delivery was 1 cent lower at $103.18 a barrel early on Monday. The contract had gained 73 cents on Friday. US crude traded 18 cents lower at $95.78 a barrel, after settling $1.41 higher.

Floor trading in the US is closed on Monday for the Labor Day holiday.

“Our view is that oil prices will strengthen a little over the next month or so. Markets have been a bit complacent regarding supply risks, and probably overestimated return in supply from places like Libya and Iran,” Pahuja said.

Libya’s oil production has ticked higher in recent months, rising to 700,000 barrels per day, state-run National Oil Corporation said on Sunday, putting it 50,000 bpd higher than what was reported early last week.

Geopolitical tension continued to support oil prices, with Iraqi army and Kurdish forces closing in on Islamic State fighters on Saturday in a push to break the Sunni militants’ siege of a town in northern Iraq, while the US carried out air strikes there.

In Russia, President Vladimir Putin called for talks on the “statehood” of southern and eastern Ukraine, while his Ukrainian counterpart Petro Poroshenko said his country was close to all-out war with Russia.

The escalation could result in new Western sanctions against Russia, the world’s biggest oil producer, although sanctions imposed so far have not directly affected energy supplies.

Head of Russian major Rosneft, Igor Sechin, said Russian oil and gas companies will honour their supply contracts despite sanctions and tensions with the West.

Iranian President Hassan Rouhani said on Saturday that new sanctions against Tehran over its nuclear programme “put into question the seriousness, honesty and good faith of negotiations with the US”

“They are in conflict with the spirit of talks. They are unconstructive in my opinion,” Rouhani said at a news conference, although he later suggested there was still hope of reaching a deal by the 24 November deadline.

In other news, Egypt’s oil ministry said the United Arab Emirates would provide “about $9 billion” worth of petroleum products to Egypt over the next year in deal to come into effect Monday.

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