Ghana's Energy Sector, Oil and Gas News
Oil rises in biggest rally amid volatility surge
Oil rallied in its biggest two-day advance since August after a slump to a 12-year low prompted some investors to buy back record bearish bets.
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Oil supplies
West Texas Intermediate for March delivery gained as much as US$1.51, or 5.1 per cent, to US$31.04 a barrel on the New York Mercantile Exchange and was at US$30.89 at 10:14 a.m. in London. The March contract has advanced 8 per cent in two days, and the generic front-month futures has surged 16 per cent since the February contract expired on Wednesday, the most since August. The volume of all futures traded was more than double the 100-day average.
Brent for March settlement climbed as much as US$1.85, or 6.3 per cent, to $31.10 a barrel on the London-based ICE Futures Europe exchange. Prices are up 10 percent since Wednesday, also the most since August.
“There will be an initial wave of supply from Iran, but once that’s done, it will be flat and I think that’s when you start seeing opportunities for oil to turn,” Ivan Szpakowski, an analyst at Citigroup in Hong Kong, said Friday. “Part of the reason oil is the trade of the year is because it’s going to have such a broad effect, it’s going to take a lot of asset classes up with it.”
Front-month futures have jumped more than 16 per cent after sliding to the lowest since 2003. Earlier this month speculators’ amassed the biggest ever short position in U.S. crude amid concern that turmoil in China’s markets will curb fuel demand while an increase in exports from Iran will exacerbate a global glut. Oil may be the “trade of the year,” if it can weather the surge in the Middle East producer’s shipments, according to Citigroup Inc.
“There will be some short-covering taking place in oil,” said Richard Mallinson, an analyst at consultants Energy Aspects Ltd. in London. “We’re seeing volatility across all markets, not just energy.”
Oil is still down about 17 per cent this year as turbulence in global markets adds to concern over brimming U.S. stockpiles and the prospect of additional Iranian barrels. Markets could “drown in oversupply,” sending prices even lower, according to the International Energy Agency. The energy industry is facing “very sharp shocks” as it struggles to deal with a “flood of oil,” BP Plc Chief Executive Officer Bob Dudley said at the World Economic Forum in Davos, Switzerland.
Oil bottom
The Chicago Board Options Exchange Crude Oil Volatility Index, a gauge of anticipated volatility in U.S. crude prices, jumped to 67.93 on Wednesday, the highest level since March 2009.
Oil should hit a bottom within one to three months, according to Szpakowski. Citigroup is among forecasters predicting a gain in the second half, projecting an average Brent price of $41 a barrel in the third quarter and US$52 in the last three months. This compares with a mean of about US$47 for the fourth quarter, according to 12 estimates this year compiled by Bloomberg.
Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, increased for an 11th week to a record 64.2 million barrels, the EIA said in a report Thursday. Nationwide supplies were more than 100 million barrels above the five-year average at the end of 2015.
“The cold spell in Europe and the U.S., along with a few producers announcing lower production targets for the year ahead provides a bit of more fundamental support,” Energy Aspects’ Mallinson said. BLOOMBERG/GB
South Africa
South Africa's rand was mostly flat against the dollar in early trade, with traders and analysts expecting it to take its steer from global trends as investors await next week's domestic monetary policy statement.
The local bourse looked set for a strong start as indicated by a 1.7 per cent jump in the Top-40 futures index.
The rand was changing hands at 16.5400 to the greenback, just 0.13 per cent firmer than its 16.5610 close in New York.
The rand has had a turbulent start to 2016, shedding 7 per cent after losing about a quarter of its value last year as investors fretted about South Africa's economic prospects and those of China, a major importer of local commodities.
"We maintain that the trend for the rand is to move weaker, and we'd expect pull-backs to be shortlived," Standard Bank said in a market note.
The sharply weaker rand is expected to drive inflation higher, forcing the South African Reserve Bank to raise interest rates despite sluggish economic growth of around 1.5 per cent, according to economists polled by Reuters.
On the debt market, government bonds edged higher, and the yield for the instrument maturing in 2026 dipped 2 basis points to 9.615 per cent. CBCNAFRICA/GB
Zimbabwe
The business community in Zimbabwe has added its voice to opposition to a proposed electricity tariff hike of 49 per cent by the Zimbabwe Electricity Transmission and Distribution Company (ZETDC), saying the economy cannot sustain any cost increases.
In a joint press statement released, the Confederation of Zimbabwe Industries, the Chamber of Mines of Zimbabwe, the Zimbabwe Farmers Union and the Commercial Farmers Union said focus should be on “improving efficiencies” and saving 300 Megawatts (MW) to 500 Megawatts (MW).
“This must be the focus area of the utility (ZETDC) instead of taking the simplistic route of hiding these inefficiencies through tariff increases,” said the statement.
ZETDC has applied for a 49 per cent electricity tariff increase that will see tariffs increase to US$14.69cents per kilowatt hour from the current US$9.86c.
The power utility said the tariff hike is cost reflective and necessary to augment emergency power imports.
However, the business community argues that most entities are already struggling to pay electricity tariffs at current levels, as evidenced by the US$1bn owed to ZETDC by some consumers.
“This debt is a clear demonstration that consumers are unable to take any tariff increase. If anything, there is a need for tariff reduction,” said the statement.
“Significant cost reduction can be realised within the utility itself,” said the statement, adding that payroll costs and head office overheads should be reduced “like what is happening in all other sectors of the economy”.
The business community also opposed the decision to bring emergency power from diesel generation into the tariff equation, saying the investment can be better utilised if deployed to provide a permanent solution to the energy crisis.
The statement by the business community comes at a time when utility costs are significantly reducing the country’s competitiveness.
“Any increase in tariff will only serve to reverse all the progress by government and the private sector to date towards addressing competitiveness and productivity of the economy,” the statement said. FIN24/GB