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Crude Oil Prices Rise to $42

Posted by By Mike Oduniyi and Chinazor Megbolu on 2004/07/23 | Views: 1227 |

Crude Oil Prices Rise to $42


Crude oil prices were on the upward trend again yesterday, hitting $41.55 per barrel in the international market, despite efforts of the Organisation of Petroleum Exporting Countries (OPEC) to stabilise prices.

Crude oil prices were on the upward trend again yesterday, hitting $41.55 per barrel in the international market, despite efforts of the Organisation of Petroleum Exporting Countries (OPEC) to stabilise prices.

The two percent increase in prices has set oil traders that won contracts to import fuel for the Nigerian National Petroleum Corporation (NNPC) for the third quarter 2004, worried over a possible slip on delivery schedules

The benchmark Brent crude rose by about 1.9 percent to $39.34 a barrel at the London Exchange Market, a development linked to the rising demand for crude oil and petroleum products in the world market.

The latest oil prices showed about 15 percent increase over the average price of $36 per barrel level at the beginning of this month, following OPEC's decision to increase production by 2.5 million barrels per day (bpd) to 26 million bpd.

OPEC President, Purnomo Yusgiantoro, said yesterday the group was already producing around 2.0 million bpd more than its combined crude output ceiling for July to ensure the market remains well-supplied.

The over-production should not be seen as violation of our agreement, but as a specific response to the market situation, Purnomo said.

"The market remains well-supplied with crude thanks to OPEC producing close to full capacity," he said.

However, as the market failed to respond to OPEC efforts, oil traders expressed worry yesterday that the high oil prices might take its toll on their fuel import contracts with the NNPC.

The NNPC two weeks ago, awarded contracts for the importation of 46 cargoes of fuel, made up of 40 cargoes (or 1.61 billion litres) of premium motor spirit and six cargoes of dual purpose kerosene, for the third quarter (July-September) 2004.

THISDAY checks, however, revealed that while the NNPC gave out the contract at premium plus $44 per metric tone, for the PMS, the high crude prices have raised the premium in the gasoline market to plus $48 per tone.

The traders, according to the contract terms, were expected to begin delivery by July 20, 2004. Sources told THISDAY that traders likely to be hit more, were indigenous oil companies whom the NNPC favoured more in the latest awards in line with its policy of promoting indigenous participation in the oil industry.

Emerging details of the contract awards showed that 17 local traders benefitted from the awards, compared to 10 in the previous quarter.

Further more, the NNPC cut down allocation to major oil traders. For instance, Shell Trading got contract to import one cargo as against three in the second quarter. Same for ChevronTexaco, Addax, Vitol, Acardia, Trafigural and other major traders.

"While those on schedule to deliver in July may still be okay in terms of prices, the problem will be with traders on August schedule when the current high crude price will manifest on product cost," one trader said yesterday.

The NNPC, it was gathered, has stated that it was not ready to review its contract prices, while sanctions await traders that default in meeting delivery schedule.

The high cost of imported fuel has translated in corresponding increases in domestic prices of fuel, with the NNPC saying it was spending N400 million daily to subsidise imports.

Speaking in Lagos yesterday on the challenges facing the Corporation, the Group General Manager of the National Inves-tment Management Services (NAPIMS), Mr. Philip Chukwu, said the NNPC is equally worried in competing in a market that is dogged by thin margin.

Chukwu who spoke at the launch of the NNPC Transformation project in Lagos, said deregulation and privatisation policies of the Federal Government was impacting NNPC businesses, where the corporation was facing major funding problem.

"There is therefore, a need for reform as available fund is insufficient to meet current and emerging business demands. The NNPC is fast running out of capital," he said.

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