Oil Prices Plunge

Source: rt.com

On word that Russia and Saudi Arabia may increase production levels the prices of crude oil dropped. This reverses an agreement to halt production made between OPEC and their allies. Brent futures lost almost 2% and WTI was down 1.7%.

Reports are that they are increasing production to make up for losses incurred due to the production halt. The market could absorb the increase because Venezuela’s output has collapsed and is not likely to be resuming in the near future. Venezuela is experiencing a financial breakdown and the military has taken over the production of oil. Another major supplier, Iran is about to face a decline in getting crude to market due to US’s sanctions.

The effects of Russia’s and China’s efforts to create an alternate channel for oil distribution is starting to show signs that the traditional oil market is moving to the east. When the Saudis break the ties with the US the petrodollars will be flowing back to the US.

Nigeria Agrees to Begin Currency Swaps With China

Source: thedailycoin.org

Since the launch of the Chinese oil futures contracts Iran, Qatar and Venezuela have made agreements to participate in oil swaps. On May 3, Nigeria signed an agreement with China to set up a currency swap. This is an initial step prior to setting up oil swaps.

According to Sputnik News

“The Central Bank of Nigeria (CBN) has signed a currency swap deal worth about $2.5 billion with the People’s Bank of China to provide adequate local currency liquidity for transactions between national businesses, The Punch newspaper reported on Thursday, citing a high-ranking official from the Central Bank of Nigeria (CBN). The deal that is the result of two-year tense talks, aimed at facilitating bilateral trade, investments and strengthening of the financial stability of both nations as well as reducing difficulties related to the use of third currencies in mutual business transactions”.

If / when Nigeria agrees to trade with China, this will be the fourth OPEC nation to leave the petrodollar likely soon to be followed by more countries. As the Chinese oil future contracts gain traction, it will be an alternative to the petrodollar. With current sentiments about the US’s blatant corruption, it is almost a given countries will move swiftly to ditch the dollar.

Source: thedailyeconomist.com