A Review of the Nigerian Energy Industry

Brent rises on Ukraine tension

-10 November 2014 – Brent crude rose towards $84 a barrel on Monday, climbing for a second straight session amid heightened military activity in Ukraine and as chaos in Libya again threatened disruptions to the country’s oil output and exports.

A slew of weak economic data from China offered further evidence the world’s second largest economy was cooling, opening the door for Beijing to implement stimulus measures that could spark demand in what is also the world’s second largest oil consumer.

The dollar nudged lower but remained close to a four-year peak on Monday, helping to cap oil markets.

A strong greenback makes dollar-denominated commodities more expensive for holders of other currencies and slows buying.

“I think generally the market was reacting to reports that Russian troops were going into Ukraine,” said Victor Shum, managing director of downstream energy consulting with IHS.

The market was also keeping an eye on the ongoing political turmoil in Libya, where the El Feel and El Sharara oilfields have been shut and exports from Libya’s 120,000 barrel per day Hariga oil port were blocked on Saturday.

Brent crude for December delivery rose 34 cents to $83.73 per barrel early on Monday after gaining 53 cents in the previous session.

The benchmark declined nearly 3% last week, the seventh straight week it had fallen, the longest such stretch since late 2002.

US crude climbed 25 cents to $78.90 per barrel after settling 74 cents higher in the previous session.

The two-month-old ceasefire between Ukraine and pro-Russian separatists looked shakier over the weekend as the pro-Moscow stronghold of Donetsk was hit by the heaviest shelling in a month on Sunday.

Also, a European security watchdog said it had spotted unidentified armoured troop columns in rebel territory, which Kiev said supported its claims that Russia was moving tanks and men into Ukraine.

China’s annual consumer inflation remained at a near five-year low in October at 1.6% and the producer price index fell 2.2%, its 32nd consecutive decline, amid sluggish demand, the National Bureau of Statistics said on Monday.

That followed weaker annual growth in China’s exports and imports in October, data showed on Saturday, although China’s crude imports compared with a year ago accelerated with the drop-off in prices.

“China trade data showed imports of crude oil accelerated to 18% in October, from 7.4% in September, as importers took advantage of a 10% drop in oil prices,” ANZ analysts said in a research note on Monday.

“China’s oil purchases (strategic and commercial) could support market sentiment near-term, but focus should remain mainly on whether or not Opec will cut output,” the analysts said.

Opec ministers will meet on 27 November and are likely to discuss how to react to the slide in oil markets that has seen Brent futures drop from a peak near $116 since June.

“I think oil prices will remain under pressure. The market can expect some sideways trade until the Opec ministerial meeting towards the end of this month if there is no significant news on supply disruptions,” Shum said

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