OPEC measures struggle to boost oil prices

LOW oil prices and the dim prospect of a resurgence in the sector have put investors in between a rock and a hard place.

Consistently low prices have hit oil companies, the Nigerian federal government, investors and banks hard.

However, according to oil experts Proshare “(although) fundamentals continue to look poor (,) there is a general consensus that the extension of the OPEC deal should push the market towards a rebalancing over the next few quarters,” according to Proshare.

But with serious doubts over OPEC’s ability to cut production to boost the price of oil, the cost of a barrel of oil dropped to a six week low on Thursday — US$46.70 before slightly recovering to US$46.90 a barrel, according to Reuters.

Although Nigeria was exempt from OPEC’s agreement to cut production, the situation hasn’t been helped by Nigeria’s recent increases in production.

But by far the biggest issue, and undermining OPEC’s commitment to reduce the number of barrels producers like Russia and Saudi Arabia make a day, the US (a non OPEC member) has significantly ramped up its production, adding to the glut of global oil stocks.

“The unpredictability of today’s oil market is leaving some investors burned by unexpected price gyrations,” Proshare said.

“Energy companies have been among the worst performing stocks in 2017.

“The poor results are leading to an exodus of capital from energy-linked exchange-traded funds… ‘People are re-allocating money to sectors that are performing better, technology or health-care, versus sitting on a sector like energy that’s down 10 plus percent’.”

This unreliability in the oil sector has forced many Nigerian banks like Heritage Bank, Zenith, Diamond, Guaranty
Trust and others to focus on Small and Medium Enterprises, business owners and entrepreneurs seeking finance.

But like most things there are two sides to the story and while Proshare suggested core market fundamentals appeared weak, “some traders see attractive entry points” with the price of oil being so low.

It may be overly simplistic but the common business adage of ‘buy low, sell high’ may be on the minds of some bullish investors.