A Review of the Nigerian Energy Industry

Oil edges higher

Oil edges higher
Oil edges higher

21 January 2015 – Oil prices edged up in early Asian trading on Wednesday in a further sign that prices are receiving support around current levels, but analysts said the outlook for the next six months remained weak due to oversupply. Oil fell as much as 5% on Tuesday after the International Monetary Fund cut its 2015 global economic forecast and key producer Iran hinted prices could drop to $25 a barrel without supportive Opec action. Prices stabilised on Wednesday morning, with traders pointing to buying this week whenever benchmark Brent crude oil dropped towards $48 a barrel. Brent crude was trading at $48.30 a barrel in early trade, up 31 cents from its last settlement, while US crude was up 38 cents at $46.85 a barrel. But analysts said the expectation for the next half year was for continued low prices. “We see little scope for avoiding a large stock build in 1H15 and therefore anticipate weak prices … Commodity price strength is inversely related to the dollar. With the US in monetary tightening mode and Europe and Japan in an expansive phase, an expected stronger dollar will create headwinds for any upward oil price improvement,” BNP Paribas said in a note overnight. “But 2H15 should see start of a price improvement, the scale of which will be tied to the extent to which demand and US supply respond to price.”

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