Oil prices edge marginally higher

Oil futures edged higher yesterday as traders weighed the health of the global economy and its impact on energy uptake.

Brent crude was up eight cents, or 0.1 per cent, to $63.45 a barrel on the ICE Europe exchange while WTI crude for September delivery on the New York Mercantile Exchange added 25 cents, or 0.4 per cent, to trade at $56.45 a barrel.

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Nigeria’s N8.91 trillion Appropriation Act 2019 was hinged on an estimated oil daily production of 2.3 million barrels; oil price benchmark of $60 per barrel and an exchange rate of N305 to the dollar.

The Senate of Africa’s largest oil producer and member, Organisation of Petroleum Exporting Countries (OPEC) had increased the budget by N80 billion, up from the N8.83 trillion presented by President Muhammadu Buhari to lawmakers last year.

The planned resumption of trade talks between the United States (U.S.) and China, the world’s largest economies, also was in focus but commodity investors appeared doubtful that a near-term resolution could be accomplished, which would if achieved help support energy demand and higher crude prices.

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Last week, both U.S. benchmark WTI and Brent saw weekly rises of around 1.5 per cent.

Oil has struggled to rally convincingly despite a string of six weekly declines in U.S. inventories and rising geopolitical tensions between Iran and other countries, notably the U.S. and Britain in the Strait of Hormuz, a key chokepoint for global oil transport, with around a third of global seaborne oil trade passing through the waterway.

Washington’s decision last May to pull out of a 2015 Iran nuclear deal set the stage for increased animosities in the region. On Monday, the U.K. sent a warship to escort its vessels in the area and warned Tehran that it must release a British-flagged vessel seized this month.

Analysts at Macquarie Capital, in a Monday note, said the bullish trend in U.S. crude inventories, which fell 10 million barrels last week, remains supportive for the short-term outlook, but they expressed worry about longer term prospects against a backdrop of diminishing economic optimism and ample global supply.

“We believe the window for upward price movement is rapidly closing, and we are lowering our conviction in tandem,” they wrote. “While we maintain our positive outlook on oil through September, or $70 (a barrel) Brent, we gross down long exposure.”

Meanwhile, the Federal Reserve’s policy decision, which is expected to deliver a quarter-point interest-rate cut on Wednesday, also could be a key inflection point for global markets, as central banks attempt to curtail a global slowdown that could impinge upon energy consumption.

“Global economic growth prospects remain fragile, so energy traders will closely await updates on both the trade front and Fed policy,” wrote Edward Moya, senior market analyst at Oanda, in a daily research note.

Formal negotiations between China and the U.S., which were set to get under way on Tuesday in Shanghai, also were being watched for signs of progress, which could help support global economic expansion. Tensions between the superpowers have underpinned concerns about crude appetite.

President Donald Trump has suggested that Beijing may avoid inking a tariff agreement with the U.S. until it determines the outcome of the 2020 presidential election. “I think that China will probably say, ‘let’s wait,’” he told reporters in the Oval Office. “When I win, like almost immediately, they’re all going to sign deals.”

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