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BusinessDay 11 Apr 2018

WEST AFRICA ENERGY

WEST AFRICA ENERGY intelligence oil gas power Wednesday 11 April 2018 C002D5556 BUSINESS DAY POWER New power sector meter regime: Business Questions finance people appointments Page 4 Ibe Kachukwu to deliver keynote address at Brandzone’s ‘Light Up Nigeria Energy Conference’ Page 6 OPEC weekly basket price DAY PRICE 6/4/18 65.11 30/3/18 66.45 23/3/18 65.08 16/3/18 62.33 9/3/18 62.52 Source: OPEC Debrief How much impact will trade war have on oil prices? FRANK UZUEGBUNAM Oil prices fell about 2 percent after US President Donald Trump threatened new tariffs on China, reigniting fears of a trade war between the world’s two largest economies that could hurt global growth. The US president said he had ordered US trade officials to consider tariffs on an extra $100 billion of imports from China, escalating tensions with Beijing. Crude oil prices sank after each round of tariffs, and while there are real concerns about the ripple effects on demand and global economic growth, it is unclear whether or not the oil and gas relationship will be directly targeted in a major way. Brent crude futures settled down $1.22 at $67.11 a barrel while US West Texas Intermediate (WTI) crude futures fell $1.48 to $62.06 a barrel, a 2.3 percent loss. Brent crude dropped 2.8 percent in the week while US crude fell 4.4 percent, the biggest weekly decline since early February. The traditional supply-demand fundamental news was mixed. However, the main determinant of the direction appears to have been lower appetite for risky assets in response to worries over an escalating trade war between the United States and China. A combination of news events helped fuel a two-sided trade before the market turned decisively lower for the week. However, crude oil prices lacked clear direction as markets balanced between declining US inventories and potential trade war fears. Markets in general have been influenced by fears of a trade war between the United States and China as both sides play with proposals of multibillion-dollar tariffs. Jamie Dimon, CEO, JPMorgan Chase, warned that “anything that starts to resemble a trade war creates risk and uncertainty to the global economic system.” China needs the energy. Also, oil and gas exports have succeeded in cutting the US trade deficit. Some analysts think US oil and gas exports to China are too important for both countries. But not everyone agrees. “China can ditch American energy at any time because there is plenty of supplies elsewhere, whereas for the US, energy is a sensitive subject,” Will Yun, a commodities analyst at Hyundai Futures Corp. said. “If China shows its willingness to impose tariffs on crude, it will send a shock wave through markets,” said Min Byungkyu, a global strategist at Yuanta Securities Co.

Wednesday 11 April 2018 02 BUSINESS DAY C002D5556 WEST AFRICA Outlook Nigeria: Qua Iboe, Forcados crude oil grades decouple ahead of Qua Iboe maintenance Ni g e r i a n c r u d e oil grade Qua Iboe strengthened above Forcados, after spending the last month at parity as reduced loadings over May and upcoming maintenance have tightened market fundamentals. Qua Iboe was assessed at a 20 cents/b premium to Forcados at a $1.10 premium to Dated Brent, the widest spread between the two grades since December 28, 2017. These two premium grades in West Africa typically track one another closely and Forcados also tends to price above Qua Iboe. But the fates of the two grades switched this week with Qua Iboe pricing higher. Next month, no loadings are scheduled until May 8 for Qua Iboe, to make way for scheduled maintenance. Details around the maintenance have yet to be confirmed. The rise in Qua Iboe prices was the exception among the broader West African market. The other West African grades continued to decline to three-month lows on slow Ghana: Fuel prices increase by 1.5 percent in April The retail prices of petroleum products at the pumps have gone up by about 2 percent for the first pricing window this month (April). For the first two weeks of this month, consumers should be prepared to pay more for fuel they purchase at the various retail outlets for the Oil Marketing Companies (OMCs). The first pricing window spans from the 3rd to the 15th of this month, April. The increases are as a result of the rise in the price of gasoline and gasoil for the period. While gasoline has increased by some 3.7 percent to $646 per metric tonne, gasoil has gone up by about 3 percent to $572 per metric tonne. Some major oil marketing companies like Total and Shell show that the demand from key Asian markets, namely India and China. China buys over half of the Angolan programs each month, which has particularly hurt heavier Angolan grades. Only half of the Angolan May loading program was heard to have cleared, further aggravating the sluggish demand for crude from the east. price of a litre of diesel, has gone up by 1.5 percent or 7 pesewas. This means you will be paying 4 cedis 56 pesewas for a litre of diesel compared to the previous 4 cedis 49 pesewas. Similarly, the two companies have adjusted the price of a litre of petrol up by 1.3 percent or 6 pesewas which translates into a litre price of 4 cedis 57 pesewas from 4 cedis 51 pesewas. In March, however, the prices of petroleum products dropped in the first pricing window but remained stable in the second pricing window. Brief oil Algeria: Algeria seeks to cut energy consumption after oil earnings fall Algeria is offering motorists incentives to more than double the number of cars running on natural gas by 2021 in an effort to reduce consumption of costly imported fuel amid strained public finances. The North African country has been struggling with a halving since 2014 of vital oil and gas revenues, which make up 60 percent of the budget and 95 percent of exports. Officials hope that making the use of liquefied petroleum gas (LPG) more attractive will reduce gasoline and diesel consumption, 2.9 million tonnes of which Algeria needs to import annually. The government is offering to cover partially the cost of car conversions for drivers, tax exemptions and a stable retail price for LPG, of which domestic output is sufficient. In contrast, the pump price of subsidised gasoline and diesel has risen about 50 percent since 2016. Algeria plans to convert 500,000 vehicles by 2021 and 1.1 million by 2030, said Mohamed Bouzeriba, head of the National Agency for the Promotion and Rationalisation of the Use of Energy. So far, only 200,000 cars run on gas out of a total 6 million. Algeria, which has spent billions of dollars to provide cheap apartments and other benefits as a means of avoiding protests, is keen to tackle energy spending to maintain social order. Authorities also want to cut electricity consumption. State utility Sonelgaz still needs aid despite a 20 percent power price increase two years ago, the first in more than a decade. Demand for electricity has risen significantly in recent years due to infrastructure projects aimed at diversifying the economy away from oil and gas. Algeria has also been building thousands of subsidised housing units and connecting them to the power grid. To boost power output, the government plans to invite bids for the construction of three photovoltaic solar plants with a capacity of 4,000 megawatts, officials said. In an effort to save power, the state electricity company has started to replace public lighting in some towns and roads under an energy-efficiency programme. Officials say measures may also include higher electricity prices for firms in the next few years. “Everyone must comply with rationalisation, especially in administrative and public buildings, social housing, schools and mosques as well as with public lighting,” Energy Minister Mustapha Guitouni said.

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