Connect with us

Markets

Oil Output Dips on Nigeria’s, Venezuela’s Outages

Published

on

oil
  • Oil Output Dips on Nigeria’s, Venezuela’s Outages

The oil output of the Organisation of Petroleum Exporting Countries (OPEC) fell to a 13-month low in May due to Nigerian outages, declining Venezuelan production, and strong compliance with a supply-cutting deal, it was learnt yesterday.

OPEC pumped 32.00 million barrels per day (bpd) in May, the survey found, down 70,000 bpd from April’s revised figure. The May total is the lowest since April 2017, according to Reuters surveys.

OPEC is reducing output by about 1.2 million bpd as part of a deal with Russia and other non-OPEC producers to get rid of excess supply. The deal began in January 2017 and, in theory, runs until the end of 2018.

With the supply glut largely cleared and oil topping $80 a barrel this month for the first time since 2014, OPEC and Russia are now shifting policy and discussing pumping more, although analysts expect any boost to be cautious.

“OPEC’s bias to err on the side of tightening remains intact,” said Konstantinos Venetis, senior economist at TS Lombard. “Easing the restrictions just means that its ‘line in the sand’ moves slightly back.”

For now though, adherence by producers in the deal to agreed levels remains strong. Compliance slipped to 163 percent of agreed cuts in May from 166 percent in April, the survey found, meaning they are still cutting far more than agreed.

The biggest decrease in supply came from Nigeria due to unplanned outages. Royal Dutch Shell’s Nigerian venture declared force majeure on Bonny Light crude exports, while loadings of another crude, Forcados, are facing delays.

The second-biggest decline came from Venezuela, where the oil industry is starved of funds because of economic crisis. Output dropped to 1.45 million bpd in May, the survey found, a new long-term low.

Production in Libya, which remains unstable due to unrest, edged lower because AGOCO, an eastern Libyan producer, had to curb output as unusually hot weather led to power problems.

Iranian output, expected to decline as the U.S. re-imposition of sanctions discourages companies from buying the country’s oil, edged lower in May but there was no evidence yet of a sizeable drop, sources in the survey said.

OPEC’s two largest producers, Saudi Arabia and Iraq, both pumped slightly more in May but not enough to offset the declines elsewhere.

Saudi Arabia’s output edged up due to more crude being used in domestic power plants, sources in the survey said, but remained below the kingdom’s OPEC target.

Iraq, the second-largest, pumped more because of an increase in exports from the south, the outlet for most of the country’s crude, following a decline in April.

Output in the country holding the OPEC presidency this year, the United Arab Emirates, was steady in May as it continues to show higher compliance than in 2017, sources close to the matter said. Kuwait also maintained full compliance.

Nigeria and Libya were originally exempt from cutting supply because their output had been curbed by conflict and unrest. For 2018, both told OPEC that output would not exceed 2017 levels.

OPEC has an implied production target for 2018 of 32.73 million bpd, based on cutbacks detailed in late 2016 and taking into account changes of membership since, plus Nigeria and Libya’s expectations of 2018 output.

According to the survey, OPEC pumped about 730,000 bpd below this implied target in May, not least because of the decline in Venezuela and a similar involuntary drop in Angola, where the survey found output was flat in May.

The Reuters survey is based on shipping data provided by external sources, Thomson Reuters flows data and information provided by sources at oil companies, OPEC and consulting firms.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Continue Reading
Comments

Crude Oil

Brent Crude Falls to $84.12, WTI Rises to $80.19

Published

on

Brent crude oil - Investors King

In a cautious market, oil prices showed mixed movements in Asian trade on Tuesday.

Global benchmark Brent crude oil, against which Nigerian oil is priced, experienced a slight decline of 13 cents, or 0.15%, to settle at $84.12 per barrel.

Meanwhile, U.S. West Texas Intermediate (WTI) crude oil saw a modest increase of 14 cents, or 0.17% to $80.19 per barrel.

The recent fluctuations come after both benchmarks posted significant gains of around 2% on Monday, marking their highest closing prices since April.

The market’s attention has now shifted back to fundamental factors, which have exhibited signs of softness for some time.

Francisco Blanch, a commodity and derivatives strategist at Bank of America, noted in a client note that global crude oil inventories and refined product storage in key locations such as the United States and Singapore remain elevated.

“The oil market shifted its focus back to fundamentals, which have been soft for some time,” Blanch stated, highlighting the broader concerns about global demand growth.

Data from the first quarter of the year indicated a deceleration in global oil demand growth to 890,000 barrels per day year-on-year, with further slowing likely in the second quarter.

Also, according to the country’s statistics bureau, China’s oil refinery output fell by 1.8% year-on-year in May due to planned maintenance and higher crude costs.

Market participants are also keenly watching for further indications on interest rates and U.S. demand trends, with several U.S. Federal Reserve representatives scheduled to speak later on Tuesday.

Despite the mixed signals, some analysts remain optimistic about the impact of OPEC+ supply cuts.

Patricio Valdivieso, vice president and global lead of crude trading analysis at Rystad Energy, said, “The latest guidance provided by OPEC+, as well as their unchanged 2.25 million barrels per day demand growth outlook, signals a stagnation in oil supply growth for 2024 and an apparent downside risk to production in 2025.”

Valdivieso further noted the disconnect between OPEC+’s demand outlook and those of other agencies, making it challenging to adopt a fully bearish stance on the market.

This sentiment has been reinforced by recent investor behavior, with hedge funds and other money managers purchasing the equivalent of 80 million barrels in key petroleum futures and options contracts over the week ending June 11.

Support for the market has also come from a rebound in refining margins, particularly in Europe and Asia.

Sparta Commodities analyst Neil Crosby pointed out that refining margins at a typical complex refinery in Singapore averaged $3.60 a barrel for June so far, up from $2.66 a barrel in May.

As the market navigates these dynamics, the cautious optimism among investors and analysts suggests a period of continued volatility and adjustment, with fundamental factors and policy decisions playing pivotal roles in shaping future price movements.

Continue Reading

Energy

Dangote Refinery’s Power Production Dwarfs National Grid’s 11-Year Progress

Published

on

ossiomo

The stark contrast in power generation between Nigeria’s national grid and Dangote Refinery has come into sharp focus as Dangote Refinery generates twice the national power production.

Over the past eleven years, Nigeria has managed to add a mere 760 megawatts (MW) to its national grid, while the Dangote Refinery has outpaced this growth significantly with  1,500 MW in a much shorter timeframe.

For decades, Nigeria has grappled with chronic power shortages, an issue that has repeatedly dominated election campaigns and policy debates.

Data from the Nigeria Electricity System Operator revealed that power delivery from Generation Companies (Gencos) to Distribution Companies (Discos) via the Transmission Company of Nigeria (TCN) has seen only a modest increase.

From an average of 3,400 MW in November 2013, it has risen to 4,160 MW as of June 12, 2024, marking a 22 percent increase.

In stark contrast, the Dangote Refinery, which began construction in 2018, now produces 1,500 MW of power for its operations.

This significant output not only surpasses the national grid’s decade-long expansion but also emphasizes the private sector’s ability to address Nigeria’s power challenges more efficiently.

“We don’t put pressure on the grid. We produce about 1,500 megawatts of power for self-consumption,” stated Aliko Dangote at the Afreximbank Annual Meetings and AfriCaribbean Trade & Investment Forum in Nassau, The Bahamas.

This development underscores concerns regarding the slow pace of growth in Nigeria’s power sector despite substantial investments and an 11-year-old privatisation effort.

“The government and some operators in the sector may claim there has been some form of growth since 2013, but in actual terms, how many people are benefiting from the privatised power sector?” questioned Charles Akinbobola, a senior energy analyst at Sofidam Capital.

He added, “The challenge of the power sector has not entirely been the scarcity of funds. Several trillions of naira have been pumped into that industry. The sector has been plagued by the shortcomings of its managers.”

Comparatively, Nigeria’s power production capacity of 13,000 MW falls significantly short of South Africa’s 58,095 MW, despite having a similar-sized economy and a quarter of Nigeria’s population.

The ageing national grid, however, delivers only about 4,000 MW to over 200 million citizens—roughly the power consumption of Edinburgh’s 548,000 residents.

Other African nations have made more significant strides in addressing their power needs.

Egypt, for instance, added 28,229 MW to its national grid between December 2015 and December 2018, achieving a total installed capacity of 58,818 MW.

This was accomplished through a fast-track project and a substantial partnership with Siemens, adding 14,400 MW in just 2.5 years.

The sluggish growth of Nigeria’s power sector is not just a technical issue but a significant economic one. Rising energy costs and unreliable power supply have disrupted productive activities, forcing many factories to self-generate more than 14,000 MW of electricity.

According to the Manufacturers Association of Nigeria, member companies spent N639 billion on alternative energy sources between 2014 and 2021, further highlighting the inefficiencies within the public power supply system.

“The power sector’s inefficiencies cost consumers billions of naira and stifle economic growth,” noted Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise. “There are issues of technical and commercial losses which are yet to be addressed. These inefficiencies are costs that consumers are compelled or expected to pay for as part of the cost recovery argument.”

The stark contrast in power generation between the Dangote Refinery and the national grid serves as a wake-up call for Nigeria’s power sector.

It underscores the urgent need for comprehensive reforms, better management, and increased investment to meet the growing energy demands of the nation’s burgeoning population.

Continue Reading

Crude Oil

Nigerian Oil Theft Escalates to 400,000 Barrels a Day, Exposing Systemic Corruption

Published

on

pipleline vandalisation

A recent report has revealed that Nigeria’s daily oil losses surged to 400,000 barrels as efforts to curb crude oil theft remain ineffective.

This escalation from 100,000 barrels per day in 2013 underscores the severe and worsening challenge facing the nation’s oil sector.

The report, produced by the public policy firm Nextier, is the result of several months of in-depth investigation.

It reveals a complex web of sophisticated networks involving powerful actors, foreign buyers, security personnel, transporters, and government officials.

This elaborate system facilitates the large-scale theft of crude oil, which has been a significant drain on Nigeria’s economy.

From 2009 to 2021, Nigeria lost 643 million barrels of crude oil, valued at $48 billion, due to theft. This loss represents more than half of the nation’s national debt as of 2021.

The situation has also severely impacted Nigeria’s ability to meet its OPEC quotas, which have dwindled from 2.5 million barrels per day in 2010 to just 1.38 million barrels per day.

The report, authored by Ben Nwosu, an associate consultant at Nextier, and Ndu Nwokolo, a managing partner at Nextier, paints a grim picture of the local dynamics fueling this crisis.

It highlights the involvement of multiple small-scale artisanal actors, who are often supported by local political and security forces. These local actors contribute to the creation of underground economies, further complicating efforts to curb theft.

Environmental hazards are another grave concern. Illegal refining processes, characterized by uncontrolled heat and poorly designed condensation units, have led to numerous explosions. Between 2021 and 2023 alone, these operations resulted in 285 deaths.

Despite these dangers, illegal refineries continue to thrive due to economic necessity and systemic corruption.

Nigeria’s four refineries, which have a combined capacity of 445,000 barrels per day, are currently operating at only 6,000 barrels per day due to mismanagement and corruption.

This shortfall forces the country to rely heavily on imported refined products, further exacerbating the situation.

Massive corruption in oil importation and subsidies has led to billions of naira being unaccounted for between 2016 and 2019.

Moreover, the government’s inability to support modular refineries has perpetuated reliance on illegal operations.

Security forces are often implicated in the theft, providing protection for a fee. Although recent measures, such as the destruction of illegal refineries, have offered temporary relief, these efforts have been short-lived.

New illegal operations quickly emerge, perpetuating the cycle of theft and corruption.

The authors of the report emphasize that addressing this complex issue requires more than punitive measures. They call for a comprehensive approach that tackles the root causes, including the need for effective governance and economic opportunities for affected communities.

Continue Reading
Advertisement




Advertisement
Advertisement
Advertisement

Trending