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Oil Falls Further as Excess Supply Knocks Sentiment

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Oil prices slipped further on Friday as swelling inventories depressed sentiment despite widespread expectations that Opec and Russia would agree some form of production cut next week.



Both international oil benchmarks, North Sea Brent and US light crude, have had their weakest month for more than 10 years in November, losing more than 20% as global supply has outstripped demand.

Brent was down 55c at $58.96 a barrel by 10.15am GMT, while US crude was down 75c at $50.70. Both contracts have made small gains this week, their first weekly rise in almost two months.

Surging oil production in the US, Russia and by members of the Middle East-dominated Opec countries has helped fill global inventories and create a glut in some markets.

A slowdown in oil demand growth is compounding the emerging oversupply.

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“Near-term oversupply has gutted Brent prices,” said Jason Gammel, analyst at US investment bank Jefferies, adding that there was “an increasing urgency to move crude into storage”.

This move is visible in the Brent forward price curve, which now has prices for future delivery above those for immediate dispatch, a structure known as “contango”, which can make it attractive to put oil into storage for later sale.

To rein in the glut, Opec and its main partner Russia are discussing supply cuts and are due to meet in Vienna on December 6 and 7 to agree on a production strategy.

“The next Opec meeting is going to prove a pivotal moment for the direction of oil prices in 2019,” BNP Paribas strategist Harry Tchilinguirian told Reuters Global Oil Forum.

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“A decision will have to be made against a background of strong US shale oil supply growth, and for now, weaker expectations on global oil demand growth.”

Before the Opec meeting, the world’s top three producers — the US, Russia and Saudi Arabia — will be part of a meeting this weekend of the Group of 20 industrialised nations in Buenos Aires, Argentina.

Oil inventories are rising fast in the US, where commercial crude stocks rose by 3.6-million barrels in the week to November 23 to 450.49-million barrels, according to the Energy Information Administration (EIA).

US crude production is at a record high of 11.7-million barrels a day.

Crude reserves increased 6.4-billion barrels, or 19.5%, to 39.2-billion barrels at the end of 2017, marginally higher than the previous record of 39-billion barrels set in 1970, the EIA said.

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-Reuters

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Nigeria Customs suggest 35% levy on imported vehicles reduction to check smuggling.

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The Comptroller-General of Customs, Col Hameed Ali (retd.) has called on the Federal Government to reduce the 35 per cent levy on imported vehicles so as to check the rising cases of smuggled vehicles into the country.

Ali said this on Wednesday in Abuja at the unveiling of a Strategic Revenue Growth Initiative which was held at the Ministry of Finance.

He said already the Nigeria Customs Service had made a proposal to the Ministry of Finance on the need for a reduction in the 35 per cent levy on imported vehicles.



Ali said currently, any new vehicle imported into the country attracted an import duty of 35 per cent and an additional levy of 35 per cent.

This, he noted, brought the total duty payable on such a vehicle to about 70 per cent.

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He described the 70 per cent being charged by the government as high, adding that time had come for it to be reduced.

In achieving this, he said, the government could still retain the 35 per cent import duty while the additional 35 per cent levy could be tinkered by bringing it downwards.

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He said, “First, we must understand the fact that smuggling in most cases did not really occur because of the tariff that is placed on goods in Nigeria.

“When we talk about vehicles, yes, new vehicles attract 70 per cent duty; that is 35 per cent duty and 35 per cent levy but most of the vehicles that are being smuggled through our borders are not new vehicles, they are used vehicles.

The Minister of Finance, Mrs Zainab Ahmed, who unveiled the Strategic Revenue Growth Initiative, said that the government was concerned about the inability of some of its agencies to meet their revenue target.

She admitted that it had become a challenge for the government to mobilise fiscal resources to deliver on its developmental objectives, adding that President Muhammadu Buhari had directed that revenue generation needed to be enhanced.

According to her, while oil revenue to oil Gross Domestic Product ratio stands at about 39 per cent, non-oil revenue to non-oil GDP is about 4.2 per cent.

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China reduce Cameroon’s debt by $78m.

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China says it has forgiven Cameroon for about $78 million debt. The move from part of Chinese support to help ease economic hardship in the central African country.

The announcement was made late last week after a meeting between President Paul Biya and Yang Jiechi, a special representative of the Chinese President Xi Jinping in Yaounde.

The said amount was due to be repaid in 2018 as part of the country’s estimated $5.7bn total debt burden. The figure is from the public body managing Cameroon’s external debt.



Analysts have, however, expressed reservations about Beijing’s motives with an economist averring that it may be linked to annexing greater access to natural resources.

“China wants to control the sub-regional market and Cameroon is the gateway,” economist Ariel Gnitedem told the reporters.

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“It is possible they also want a greater share in the enormous natural resources in Cameroon which are essential to feed its home industries,” he added.

President Biya joined his African counterparts at the Forum for China – Africa Cooperation, FOCAC summit held in September 2018 in Beijing. Biya met with Jinping and reportedly requested for the repayment waiver.

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Cameroon like most other African countries continue to turn to China for loans to largely finance infrastructure projects. Analysts have raised issues about the non-sustainability of these loans.

Governments have routinely rejected the concerns stating that the relationship was based on mutual respect for both parties. China has also provided wide ranging support to the continental bloc, African Union.

The United States got into a diplomatic spat with China over its financial dealings with Africa stating that Africa was been shackled with Chinese money.

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