Oil hits 6-week low over supply concern
Oil prices dropped to six-week lows on Thursday under pressure from high global inventories and doubts about OPEC’s ability to implement agreed production cuts.
Brent crude oil fell 30 cents to $46.70 a barrel; its weakest since May 5 and just above six-month lows, before recovering a little to trade around $46.90 by 1345 GMT.
U.S. light crude was down 25 cents at $44.48, also not far off six-month lows.
Both crude benchmarks have lost all the gains made at the end of last year after the Organisation of Petroleum Exporting Countries agreed with other big producers to cut output in an effort to prop up prices.
OPEC and its allies have promised to restrict output until at least the end of the first quarter of next year to try to drain surplus supply.
But inventories are near record highs in many parts of the world, and many traders expect further price falls.
“Oil prices are pinned near their lowest level in seven months,” said Stephen Brennock, analyst at London brokerage, PVM Oil Associates, adding that the market showed, “little in the way of upside potential.”
Crude prices have fallen about 12 per cent since May 25, when OPEC agreed to extend its output limits into next year.
Despite the deal, some OPEC members, including Nigeria and Libya, have been exempted from cutting and their rising output is seen to be undermining efforts led by Saudi Arabia.
“OPEC 2017 year-to-date exports are only down by 0.3 million barrels per day (bpd) from the October 2016 baseline,” analysts at AB Bernstein wrote.
OPEC’s pledge was to cut some 1.2 million bpd, while other producers, including Russia, agreed to bring the total reduction to almost 1.8 million bpd. The National Sugar Development Council (NSDC) has said that Nigeria’s N2 billion packaged sugar investments are being threatened by smuggling of packaged sugar into the country.
Speaking to journalists in Abuja yesterday, the council’s Executive Secretary, Dr. Latif Busari, said importers were flouting the country’s ban on importation of packaged sugar by smuggling them into the country.
He said the implication was that local sugar packaging and cubing businesses were folding up with resultant job losses, while the imported ones took over the market.
In 2013, Nigeria banned the importation of packaged sugar into the country as part of efforts to grow the nation’s sugar industry.
However, four years later, foreign sugar brands still flood Nigerian markets, threatening the local business.
Busari expressed dismay over “the parlous state of the sugar packaging segment of the sugar value chain arising from the continued entry of foreign brands of packaged sugar into our markets.”
He pointed out that the St. Louis brand had defied invitation to invest in Nigeria by opening the packaging company in Nigeria even as the brand was heavily smuggled into the country.
He said Nigeria had the capacity to package sugar for local consumption, sourcing the refined sugar from local refineries.
He urged the enforcement agencies to intensify action on restricting the entry of packaged sugar into the country and also pleaded with Nigerians to reject imported ones and buy locally packaged ones.