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Market Optimism Push Oil Price Near $40 A Barrel

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Oil prices rose sharply yesterday to a near threemonth high on optimism that major producers will extend production cuts as the world recovers from the COVID-19 pandemic. Brent crude was up 22 cents, or 0.6 per cent, at $39.79, the highest since March 6, having gained 3.3 per cent on Tuesday, while the US West Texas Intermediate crude (WTI) gained 33 cents, or 0.9 per cent, at $37.14, also the highest since March 6. The contract ended the previous session up 3.9 per cent. It could be recalled that on the wake of the Coronavirus outbreak and subsequent fall in the price of crude oil to below $20 per barrel, the federal government, revised the 2020 budget benchmark from $57 a barrel to $30 a barrel.
This amount was further revised downwards to $25 per barrel by the federal government, but pegged at $28 by the Senate on Tuesday. Both benchmarks have risen sharply in recent weeks from the lows of April, buoyed by a continuing recovery in China, the epicentre of the virus outbreak, while other economies are slowly opening up after lockdowns to contain its spread. The Organisation of the Petroleum Exporting Countries, (OPEC), and others including Russia may extend production cuts of 9.7 million barrels per day (bpd), or about 10 per cent of global output, into July or August, sources told Reuters. “As virus-related lockdown measures continue to be lifted, we expect that demand will gradually recover,” Capital Economics said in a note, estimating that global oil consumption will fall to just under 92million bpd on average in 2020.
This compared with 100.2 million bpd in 2019, it said, before the pandemic swept through Europe and the United States, evaporating demand for everything from flying to trips to the dentist. Oil is likely to end up in “a small deficit later this year, which should provide some additional support to prices,” it added. Meanwhile, as the nation open up for normal business transaction amidst growing fears of contacting the dreaded Coronavirius (COVID 19), the Nigerian National Petroleum Corporation (NNPC), said it has developed a contactstracing software application that would be deployed in all its locations across the country. Similarly, in order to minimise human contacts in business transactions of its Downstream subsidiary, the Petroleum Products Marketing Company (PPMC), a Downstream subsidiary of NNPC, has also deployed a Sales and Distribution application in the Oil and Gas Secondary Model Portal that would enable marketers buy petroleum products online.

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