Oil suffer worst weekly performance amid trade turmoil

The global oil market has been experiencing significant shifts in recent times, with trade tensions between the U.S. and China playing a major role in the volatility of oil prices. Brent futures saw a substantial decrease in prices last week, marking its biggest weekly decline. To delve deeper into the dynamics at play in the global oil market, Edward Voelcker, an Independent Advisor on Oil and Gas, shared insights in an interview with CNBC Africa from London. Voelcker highlighted the prominent role that U.S.-China trade issues have played in influencing oil prices. He emphasized that the fourth quarter of 2018 witnessed a significant drop in oil prices from around $80 per barrel to $50 per barrel in just 90 days. Trade tensions, particularly during the time when Huawei's CFO was arrested in Canada, contributed to this decline. Additionally, concerns such as potential yield inversion in the U.S. and discussions about a looming recession further exacerbated the situation. While there was a recovery in the early part of 2019, with oil prices surpassing $70 per barrel, recent corrections have once again brought about challenges. Voelcker noted that China's role in the market is intertwined with other issues like Iran and Venezuela. The imposition of sanctions on Iran by the Trump administration has significantly impacted the country's oil production, leading to a decline from 3.8 million barrels per day to an estimated 2.7 million barrels. Despite attempts to track Iranian crude sales, cheating through tactics like turning off transponders on tankers complicates monitoring efforts. Addressing the implications of further U.S. sanctions on Iran, Voelcker estimated that approximately one million barrels per day could be taken off the market due to Iranian sanctions, with an additional 500,000 barrels per day reduced from Venezuela's production issues. However, the U.S. is expected to ramp up its oil production by 1.5 million barrels per day in 2019, potentially offsetting some of the global supply cuts. In light of the upcoming OPEC meeting, Voelcker discussed the varying interests of member countries like Nigeria, which may seek production increases. With the larger backdrop of macroeconomic conditions impacting oil prices, the outcomes of the OPEC meeting remain uncertain. Factors like potential recessions in developing economies could also influence oil prices in the future. Shifting focus to Nigeria, Voelcker emphasized the importance of passing essential bills like the Petroleum Industry Governance Bill to attract foreign investment and improve commercial viability in the country's oil sector. Progress in renegotiating past production sharing contracts and addressing technical hurdles could enhance Nigeria's oil and gas production capacity, fostering optimism for the country's energy sector. Regarding the resumption of the Trans Forcados Pipeline (TFP) in Nigeria, Voelcker expressed optimism but underscored the necessity of collaboration among all stakeholders, including the government and local communities. He highlighted the significance of maintaining infrastructure like the Emook pipeline to diversify export options for crude oil. Voelcker stressed the importance of addressing longstanding issues in the Niger Delta region to ensure sustainable oil supply and equitable outcomes for all parties involved. The complexities of the global oil market continue to evolve, with geopolitical tensions, production cuts, and economic uncertainties shaping the trajectory of oil prices. As stakeholders navigate these challenges, strategic decisions and cooperation will be crucial to mitigating volatility and fostering stability in the oil market.