Oil prices continue to decline as U.S-China trade war deepens

The global oil markets have been experiencing volatility due to a combination of factors, including rising US crude inventories, weak economic data from China, and ongoing trade tensions between the US and China. Oil prices were down in early trade, erasing some of the gains from a recent surge. To provide insight into this complex landscape and its impact on Nigeria's oil and gas sector, Rolake Akinkugbe-Filani, Senior Vice President and Head of Energy and Natural Resources at FBNQuest Merchant Bank, shared her perspectives in a recent interview with CNBC Africa. Akinkugbe-Filani highlighted several key themes and factors influencing oil prices and the energy sector at large. One of the primary drivers affecting oil prices is the US-China trade war, which has dampened demand in China, a major global center for oil consumption. While recent news of delayed tariff increases provided some relief to the markets, long-term trends, such as continued shale oil and gas production reaching record levels, are expected to keep prices below $60 a barrel in the medium term. Additionally, the dynamics within OPEC, particularly with Saudi Arabia and Russia, play a crucial role in balancing production cuts to support price levels. With OPEC set to review its pricing strategy in December, further production cuts may be on the horizon. Akinkugbe-Filani emphasized the importance of considering both supply-side and demand-side factors in analyzing oil price movements, noting that disruptions and emerging markets like China and India also impact global demand. Another significant factor influencing the oil market is the International Maritime Organization's (IMO) regulations, which will cap sulfur content in heavy fuel oil used for shipping bunkers by 2020. This shift is expected to increase demand for light sweet crude, benefiting producers like Nigeria and the US, while potentially disadvantaging heavier crude exporters from the Middle East. Akinkugbe-Filani highlighted the potential winners and losers in this regulatory change, noting that Nigeria stands to benefit as a major producer of light-sweet crude. Despite the challenges posed by fluctuating oil prices and market dynamics, Nigeria is eagerly anticipating the completion of the Dangote Refinery, a game-changing project that will enhance domestic production of petroleum products and reduce the country's reliance on costly imports. The refinery's delayed start date, now expected in late 2020, highlights the complexity of large-scale investments and the need for robust project management in the energy sector. Akinkugbe-Filani expressed optimism about the refinery's transformative impact on the local market once operational. While technical delays are not uncommon in such ambitious ventures, the long-term benefits of the refinery for Nigeria's energy security and economic stability are highly anticipated. As global oil markets navigate geopolitical uncertainties and regulatory changes, stakeholders in the energy sector, including Nigeria, must adapt to evolving trends and seize opportunities for sustainable growth and development.