•House checks impact on the economy
•We have no solution to crude oil theft, says NNPC
Ejiofor Alike, Peter Uzoho in Lagos and Udora Orizu in Abuja with agency reports
Crude oil price moved by around eight per cent yesterday, a day after the biggest rout in nearly 30 years as investors eyed the possibility of economic stimulus and Russia signalled that talks with the Organisation of Petroleum Exporting Countries (OPEC) remained possible.
The crash in oil price has also prompted fuel marketers, under the umbrella of Major Oil Marketers Association of Nigeria (MOMAN), to restate their call for the reform of the country’s petroleum industry, especially the removal of petrol subsidy.
Also yesterday, the House of Representatives set up a committee to probe the impact of the oil price volatility on the economy.
The global benchmark, Brent crude futures, was up $2.84, around eight per cent, to $37.20 a barrel, after hitting a session high of $38.22 a barrel.
West Texas Intermediate (WTI) crude gained $2.53, or around eight per cent, to $33.66 a barrel, after hitting a high of $34.60.
Both benchmarks plunged 25 per cent on Monday, dropping to their lowest levels since February 2016 and recording their biggest one-day percentage declines since January 17, 1991, when oil prices fell at the onset of the first Gulf War.
Russian Energy Minister, Mr. Alexander Novak, said yesterday that Moscow was open to further cooperation with OPEC to stabilise the oil market.
“I want to say the doors aren’t closed,” Novak told the state-run Rossiya 24 television network.
The lack of agreement with OPEC on extending production cuts “does not mean that in the future we can’t cooperate with OPEC and non-OPEC countries.
“If necessary, we have various tools, including reduction and increasing production,” Novak said, adding that new agreements can be reached.
“We have planned the next meetings in May or June to assess the situation on the market.”
Russia refused to agree to a proposal by OPEC ministers led by Saudi Arabia for a drastic cut of 1.5 million barrels per day, with Russian oil companies fearing loss of market share and of competitiveness against US shale production.
Saudi Arabia responded on Sunday with the biggest cut in its prices of the past 20 years in a bid to win market share.
Saudi Aramco said yesterday it would boost its supply of crude oil to 12.3 million barrels per day in April, flooding markets as it escalates a price war with Russia.
Novak said Russia could also swiftly increase its production.
“We have the potential for growth in production. I think in the short-term, we can increase by 200-300,000 barrels (per day) with the prospect of 500,000 barrels, that’s in the near future.”
He added that Russia is competitive in the world markets because of low production costs.
US President Donald Trump on Monday said he would be taking “major” steps to protect the US economy against the impact of the spreading coronavirus outbreak, while Japan’s government plans to spend more than $4 billion in the second package of steps to cope with the virus.
Trading volumes in the front-month for both contracts hit record highs in the previous session after three years of cooperation between Saudi Arabia and Russia and other major oil producers to limit supply fell apart on Friday, triggering a price war for market share.
Saudi, the world’s biggest oil exporter, escalated tensions with plans to supply 12.3 million barrels per day (bpd) in April, well above current production levels of 9.7 million bpd, Saudi Aramco CEO Amin Nasser said yesterday.
April’s crude supply will be “300,000 barrels per day over the company’s maximum sustained capacity of 12 million bpd,” Nasser said in a statement received by Reuters.
Price pared gains by over $1 on the news.
Novak said he did not rule out joint measures with OPEC to stabilise the market, adding that the next OPEC+ meeting was planned for May-June.
But in response, Saudi Arabia’s energy minister told Reuters he did not see a need to hold an OPEC+ meeting in May-June if there was no agreement on what measures should be taken to deal with the impact of the coronavirus on oil demand and prices.
“I fail to see the wisdom for holding meetings in May-June that would only demonstrate our failure in attending to what we should have done in a crisis like this and taking the necessary measures,” Prince Abdulaziz bin Salman said.
The sentiment was also lifted after Chinese President Xi Jinping visited Wuhan, the epicentre of the coronavirus outbreak, for the first time since the epidemic began, and as the spread of the virus in mainland China slows sharply.
China, the world’s second-largest oil consumer, is trying to get people in hard-hit Hubei province back to work by using a mobile phone-based monitoring system that will allow people to travel within the province.
Crude was also supported by hopes for a settlement to the price war and potential US output cuts, although analysts warned gains may be temporary as oil demand continues to be hit by the virus outbreak, which has spread beyond China and prompted Italy to implement a nationwide lockdown.
US shale producers rushed to deepen spending cuts and could reduce production after OPEC’s decision to pump full bore into a global market hit by shrinking demand.
We Have No Solution to Crude Oil Theft, Says NNPC
Meanwhile, the NNPC has cried out that it does not have any solution to the menace of crude oil theft in the country.
The Group Managing Director, Malam Mele Kyari, disclosed this yesterday at the public investigative hearing of the House of Representatives Ad-hoc Committee on crude oil theft.
Kyari, who was represented by the Chief Operating Officer (COO), Mr. Roland Ewubare, said in a country that is struggling to raise money to finance its developmental aspiration, every single barrel of oil lost is critical irrespective of the current flop in price.
According to Kyari, “Nobody has the monopoly of wisdom and I certainly don’t know what the solutions are to this problem. I’m a soldier’s son, so I have the utmost respect for the military, but I’m sure that even the military itself doesn’t have a silver bullet solution to the problem because it is a very complex problem arising from different roots.”
He said the NNPC believed that the core of the problem anchors on two elements; while one is criminality, the other emanates from the historical neglect of the communities in Niger Delta from where resources are produced.
Kyari said: “What are the consequences of these illegal activities from the numbers you mentioned? You (Akpatason) said it is 200,000 barrels per day, while the House Speaker said it is 400,000bpd. The truth is that we really don’t have the exact figure. It is a complex process to track what is lost, as some are lost through the aged and ageing facilities. Some pipelines are old, they can’t handle pressure, so you get spilt product, while some of it is deliberate.”
Kyari equally lamented that there was a threat to national security as a result of vandalisation, adding that crude oil thieves use the proceeds of theft to finance nefarious activities in the country as well as stockpiling weapon in order to remain in business.
On his part, the Commander of Operation Delta Safe, Rear Admiral Akinjide Akinrinade, said in 2017, the military destroyed about 1,001 illegal refineries, recovered 54, 373 tons of stolen products, while in 2018, it destroyed 1,524 illegal refineries, recovered 155,974 tonnes of stolen products. In 2019, the military also destroyed 1,694 illegal refineries, while 52 ships, 42 barges and 122,056 tons of stolen products were also recovered.
He added that about 255 suspected oil thieves were also arrested and handed over to the appropriate security agencies.
Akinrinade noted that in 2019 alone, the military was able to stop about 413 infractions along the pipeline, which amount to about 76 per cent of the total infractions along the pipeline operated by Shell.
Major Marketers Seek Petrol Subsidy Removal
Worried by the persistent drop in crude oil price lately, due to the coronavirus disease, MOMAN has restated the call for the reform of the country’s petroleum industry, especially the removal of petrol subsidy.
The fuel traders said removing fuel subsidy at this period of a drop in crude oil prices would eliminate waste and address the issue of low price margin for marketers.
The marketers said while the oil price slump should naturally be a source of concern to the world, it, however, presents Nigeria with the opportunity to reform and restructure its petroleum downstream sector.
Speaking with journalists in Lagos, the Chairman of MOMAN and Managing Director of 11Plc, Mr. Tunji Oyebanji, advised that Nigeria should take advantage of the trending price reduction.
“Removing fuel subsidy at this period of drop in prices would eliminate waste, address the issue of low price margin for marketers as well as set the country on the path of determining appropriate pricing for the product through urgent robust reforms,” he said.
According to Oyebanji, the drop in crude oil price will also open up the importation of petrol by bringing multiple players to participate in importation.
He appealed to the federal government to review industry margins to enable them to improve their earnings and invest in products distribution infrastructure.
House Probes Impact of Oil Price Crash on the Economy
Meanwhile, the House of Representatives has set up a joint committee comprising of finance, petroleum, and budget and planning to interface with stakeholders and check the impact of the recent crash of crude oil on 2020, Appropriation Act.
This followed the adoption of a motion of urgent public importance, titled, ‘Motion of urgent public importance, on the recent crash of crude oil as against our 2020, appropriation Act,’ moved by Hon. James Faleke, at yesterday’s plenary.
THISDAY had reported that as Coronavirus (COVID-19) maintained its spread to more countries, it had forced a lower demand for crude oil and attendant push for production cuts to stabilise prices by OPEC.
Faleke said the current price of oil at around $30 might hinder the implementation of the 2020 budget.
The committee is expected to report back to the House within two weeks.