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Oil prices near $80 on mild Omicron variant

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Oil prices rose over three per cent yesterday on hopes that the Omicron COVID-19 variant would have limited impact on global demand in 2022, even as surging cases caused flight cancellations in some countries.

Global benchmark Brent crude rose $2.59, or 3.40 per cent, to $78.73 a barrel yesterday, while the United States West Texas Intermediate (WTI) crude rose $2.01, or 2.7 per cent, to $75.80 a barrel.

Prices of oil which had plunged by more than 10 per cent on November 26, when reports of a new variant first appeared, started to gain last week after early data suggested that Omicron could cause a milder level of illness.

Although the variant had been spreading faster than any COVID-19 variant yet, there’s been some relatively relieving news that most people infected with Omicron showed mild symptoms so far.

However, more than 1,300 flights were cancelled by US airlines on Sunday as COVID-19 reduced the number of available crews while several cruise ships had to cancel stops.

This caused disruption to the supply of goods and services from isolating workers, notably air travel, although the global recovery story for 2022 still remains on track.

Brent has risen by more than 45 per cent this year, supported by recovering demand and supply cuts by the Organisation of Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+.

On January 4, the producer alliance would decide whether to go ahead with a planned 400,000 barrels-per-day (bpd) production increase in February, but the cartel has so far stuck to its plans at its last meeting to boost output for January despite Omicron.

OPEC has been struggling to meet existing targets under its agreement to gradually increase production by the 400,000 bpd each month, with Nigeria lagging behind for months.

But the country, a very active OPEC member had said even if prices fell to between $50 to $60, it won’t be much of an issue, with the country’s oil benchmark for the 2021 budget being $40.

Nigeria has failed for months to meet its allocation, due largely to waning investment, ageing upstream infrastructure and disruptions by some local host communities.

But the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) last week assured that by the year’s end, Nigeria should be able to produce about 1.7 million bpd. That target now looks almost impossible.

On December 22, Nigeria’s federal lawmakers approved a N17.126 trillion ($38 billion) budget for 2022, anchored on an oil price benchmark of $62 per barrel.

The approved oil price assumption was higher than the $57 per barrel price that President Muhammadu Buhari had proposed to the parliament on October 7, and also higher than the oil price benchmark of $40 per barrel adopted by the government for the 2021 budget.

Senate President, Ahmad Lawan, said the increase in oil price was to reflect the current market values of the oil barrel in the international market and to generate more funds for critical sectors of the economy.

However, the parliament retained the oil production target of 1.88 million bpd, including condensate production of between 300,000-400,000 bpd, for the purpose of its revenue calculation in 2022.

This compared to the output target of 1.86 million bpd the government had set for the 2021 fiscal year.

In all, oil exports account for around 80 per cent of Nigeria’s foreign exchange revenue, although the country has battled with a sharp drop in revenue amid a drop in production.

Nigeria has the capacity to pump around 2.2 million b/d of crude and condensate, but in recent months its output has been languishing below 1.55 million bpd.

In November, the NNPC was only able to contribute about N10.5 billion of its projected N122 billion to the federation account jointly run by the federal, state and local governments in the country.

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Google set to invest $9.5bn in US

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Google has announced plans to invest $9.5bn in its US offices and data centers around the country in 2022, up from more than the $7bn it spent in 2021.

According to CNN, the big bet on office space was coming at a point Google was embracing a hybrid work model. The Alphabet-owned company has called for many of its employees to work in an office three days a week after two years of being fully remote.

The Chief Executive Officer of Alphabet and Google, Sundar Pichai, said, “It might seem counterintuitive to step up our investment in physical offices even as we embrace more flexibility in how we work.

“Yet we believe it’s more important than ever to invest in our campuses and that doing so will make for better products, a greater quality of life for our employees, and stronger communities.”
Google said it would open an office in Atlanta this year and continue to develop and expand office space in Austin and New York. It added that it planned to continue investing in data centers in Iowa, Nebraska, and Tennessee, among other states.

As part of the announcement, Google said it expected to create at least 12,000 new full-time jobs at the company this year.

Google and other tech companies were among the first businesses to shift to remote work when the pandemic hit in early 2020. But that shift always appeared to be temporary. Like others in Silicon Valley, Google had previously invested billions in expansive campuses and lavish office benefits for workers.

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European markets pull back amid doubts over latest Russian pledges over Ukraine

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European stocks retreated on Wednesday following the latest round of talks between Russia and Ukraine, aimed at finding a solution to the conflict.

The pan-European Stoxx 600 fell 0.8% in early trade, with autos shedding 1.9% to lead losses, while oil and gas stocks gained 1.7%.

In terms of individual share price movement, Finland’s Nokian Tyres fell 6.6%, while Sweden’s Lundin Energy added 4.7%.

Investor sentiment was boosted on Tuesday following negotiations between Russian and Ukrainian officials in Turkey, at which Russia’s deputy defense minister claimed Moscow had decided to “drastically” cut back its military activity near Ukraine’s capital.

Alexander Fomin, who spoke following the talks in Istanbul, said Russia would slow its military operations near Kyiv and Chernihiv in order for peace talks to progress. Russia previously claimed that it would reduce military operations in other parts of Ukraine but then continued its advance.

Growing hope for a cease-fire appeared to boost investor sentiment Tuesday, as Dow Jones Industrial Average futures rose 200 points, or 0.6%. S&P 500 futures also climbed 0.6%, while Nasdaq 100 futures climbed 0.7%. Meanwhile, the price of U.S. benchmark West Texas Intermediate crude oil, which spiked on the heels of Russia’s invasion of Ukraine, fell more than 4% to $100 per barrel.

Doubts have set in over the pledge, however, and while the Russian military has begun moving some of its troops in Ukraine away from areas around Kyiv to positions elsewhere in Ukraine, Pentagon Press Secretary John Kirby warned the troop movements do not amount to a retreat.

Shares in Asia-Pacific were mixed in Wednesday trade as investors watch for developments surrounding the war in Ukraine. Stateside, traders are keeping tabs on a slew of key economic reports, while also monitoring the Federal Reserve’s planned interest rate hikes.

The Job Openings and Labor Turnover Survey on Tuesday showed 11.3 million job openings, higher than the 11.1 million expected. The ADP will also release its private payrolls data ahead of the closely watched monthly jobs report, on Friday.

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Lagos Assembly kicks against harassment of residents by police

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Lagos State House of Assembly Speaker, Mudashiru Obasa, yesterday, cautioned police in the state against harassment, intimidation and extortion of residents.

Obasa said this on the floor of the House when lawmakers honoured outgoing Commissioner of Police, Mr. Hakeem Odumosu, who has been promoted to Assistant Inspector-General, and is due to retire in January 2022.

Obasa said Odumosu was honoured as the first Commissioner of Police in the state to stand before the lawmakers and address Lagosians on his experience policing the state.

The Speaker thanked Odumosu for his openness and responsiveness to issues affecting the peace of the state.

“It is important to call on those behind you to know that the relationship between the police and the people need to be constantly improved upon,” Obasa said, adding that men of the Nigeria Police Force need to build more trust among the people.

“Everybody must be treated with respect, dignity and honour. And that is how we can earn respect. Policing should not be about harassment and extortion but building trust among the people and making them comfortable,” Obasa said.

The Commissioner of Police, who led a team of officers to the House, thanked the lawmakers for their support. According to him, nothing could have been achieved in terms of security and peace in the state without assistance of the House.

He said he would remain grateful to Lagosians for making it possible for him and his team to effectively manage the security of the state.

Odumosu, who described Lagos as ‘mini-Nigeria’, said proactivity of the Assembly led to the creation of laws that helped the police remain successful in the state.

He said the Cultism Prohibition Law also helped to reduce illegal associations in tertiary institutions in the state and enlightened property owners and residents.

“We promise to continue to excel in providing watertight security for people of the state,” he told the lawmakers. He also promised he would encourage his successor to sustain the relationship between the police and the House, while urging the lawmakers to extend their support to his successor.

“Policing Lagos is not a tea party. Without the laws in Lagos, it would have been difficult to police the state. Don’t get tired, don’t relent in making laws that would make Lagos maintain its place as the most peaceful state in Nigeria,” he said.

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