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Despite Global Crude Oil Price Recovery, NNPC Revenue Declined by 27.02% In the First 5-Months of 2021

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NNPC

The Nigerian National Petroleum Corporation (NNPC) revenue declined 27.02 percent to N1.08 trillion in the first five months of 2021 compared with N1.48 trillion revenues earned in the corresponding period of last year.

According to a Federation Account Allocation Committee (FAAC) document, the state-owned oil firm earning declined by N396.8 billion in the period despite global crude oil price recovery.

The document also showed that the corporation failed to meet its monthly funding obligation of N414.94 billion for its projects and operations for the period.

Whereas the NNPC has a total revenue projection of N4.97 trillion for 2021, sub-divided into N414.941 billion per month, the document showed that in January, it raked in gross revenue of N195.624 billion and N191.194 billion in February.

In March, the NNPC’s total revenue stood at N224.589 billion and was N156.366 billion in April, while in May, the corporation grossed a revenue of N320.315 billion to hit N1.088 trillion.

In comparison, for the same period in 2020, gross revenue, which is a summation of receipts from Joint Venture (JV) crude oil, JV gas, Production Sharing Contracts (PSC) and miscellaneous sources stood at N380 billion in January.

The revenue in February was N264.1 billion, in March, it was N324.4 billion, it was N298.1 billion in April and it stood at N219.3 billion in May.

However, the corporation resumed the monthly funding for its frontier exploration services which did not receive any budget in April, but gulped N3.22 billion in May, having received N1.96 billion in January, N1.92 billion in February and N2.255 billion in March.

The NNPC is currently performing exploration and drilling activities of Kolmani River 3, had reported earlier that the first appraisal, Kolmani River 2, in the Gongola Basin, encountered both oil, condensate and gas, which it said were significant finds.

The corporation is also carrying out exploration activities in the Chad Basin further northwards but had to halt its seismic operations after insurgents attacked and killed the technical workers and some security forces.

Although financing of frontier exploration basins is currently at the discretion of the corporation, the new Petroleum Industry Bill (PIB), if assented to by President Muhammadu Buhari as it currently exists will make it mandatory for the NNPC to deploy 30 percent from proceeds of its production sharing, profit sharing and risk service contracts to fund exploration of the basins.

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Goldman Sachs Revised Down Brent Oil Forecast for Q3 2021

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Brent crude oil - Investors King

Goldman Sachs Group, an American multinational investment bank and financial services company, has revised down its Brent oil price projection for the third quarter (Q3) of 2021 by $5 from $80 per barrel previously predicted to $75 a barrel following the surge in Delta variant COVID-19.

The investment bank predicted that the surge in Delta variant COVID-19 cases will weigh on Brent oil price in Q3 2021 even with the expected increase in demand.

However, the bank projected a stronger second half of 2021, saying OPEC+ adopted slower production ramp-up will offset 1 million barrel per day demand hit from Delta.

Goldman said, “Our oil balances are slightly tighter in 2H21 than previously, with an assumed two-month 1 mb/d demand hit from Delta more than offset by OPEC+ slower production ramp-up.”

The leading investment banks now projected a deficit of 1.5 million barrels per day in the third quarter, down from 1.9 million barrels per day previously predicted.

Therefore, Brent crude oil is expected to average $80 per barrel in the fourth quarter, a $5 increase from the $75 initially predicted and the bank sees 1.7 million barrels per day in the fourth quarter.

The oil market repricing to a higher equilibrium is far from over, with the bullish impulse shifting from the demand to the supply side,” the bank said.

Goldman added that even if vaccinations fail to curb hospitalisation rates, which could drive a longer slump to demand, the decline would be offset by lower OPEC+ and U.S. shale output given current prices.

Oil prices may continue to gyrate wildly in the coming weeks, given the uncertainties around Delta variant and the slow velocity of supply developments relative to the recent demand gains,” it said.

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Oil Extends Gains on Thursday on Expectations of Tighter Supplies

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Crude Oil - Investors King

Oil prices rose about $1.50 a barrel on Thursday, extending gains made in the previous three sessions on expectations of tighter supplies through 2021 as economies recover from the coronavirus crisis.

Brent crude settled at $73.79 a barrel, up $1.56, or 2.2%, while U.S. West Texas Intermediate (WTI) settled at $71.91 a barrel, rising $1.61, or 2.3%.

“The death of demand was greatly exaggerated,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “Demand is not going away, so we’re back looking at a very tight market.”

Members of the Organization of the Petroleum Exporting Countries and other producers including Russia, collectively known as OPEC+, agreed this week on a deal to boost oil supply by 400,000 barrels per day from August to December to cool prices and meet growing demand.

But as demand was still set to outstrip supply in the second half of the year, Morgan Stanley forecast that global benchmark Brent will trade in the mid to high-$70s per barrel for the remainder of 2021.

“In the end, the global GDP (gross domestic product) recovery will likely remain on track, inventory data continues to be encouraging, our balances show tightness in H2 and we expect OPEC to remain cohesive,” it said.

Russia may start the process of banning gasoline exports next week if fuel prices on domestic exchanges stay at current levels, Energy Minister Nikolai Shulginov said, further signalling tighter oil supplies ahead.

Crude inventories in the United States, the world’s top oil consumer, rose unexpectedly by 2.1 million barrels last week to 439.7 million barrels, up for the first time since May, U.S. Energy Information Administration data showed.

Inventories at the Cushing, Oklahoma crude storage hub and delivery point for WTI, however, has plunged for six continuous weeks, and hit their lowest since January 2020 last week.

“Supplies fell further by 1.3 million barrels to the lowest level since early last year, theoretically offering support to the WTI curve,” said Jim Ritterbusch of Ritterbusch and Associates.

Gasoline and diesel demand, according to EIA figures, also jumped last week.

Barclays analysts also expected a faster-than-expected draw in global oil inventories to pre-pandemic levels, prompting the bank to raise its 2021 oil price forecast by $3 to $5 to average $69 a barrel.

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OPEC+ Increases Nigeria’s Crude Oil Production to 1.829mbpd

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Crude oil - Investors King

The Organisation of Petroleum Exporting Countries and allies (OPEC+) on Sunday agreed to restore Nigeria’s oil production to 1.829 million barrels per day (mbpd) following a new agreement reached between members to ease the standoff between two oil-producing giants, Saudi Arabia and the United Arab Emirates.

Nigeria produced 1.48mbpd in June, down from 1.55 million bpd produced in the month of May. Suggesting that Africa’s largest oil producer has fundamental issues preventing it from meeting the old production quota.

The Organization of Petroleum Exporting Countries (OPEC) and its non-OPEC allies reached a deal Sunday to phase out 5.8 million barrels per day of oil production cuts by September 2022 as prices of the commodity hit their highest levels in more than two years.

Coordinated increases in oil supply from the group, known as OPEC+, will begin in August, OPEC announced in a statement.

Overall production will increase by 400,000 barrels per day on a monthly basis from that point onward. The International Energy Agency estimates a 1.5 million barrel per day shortfall for the second half of this year, indicating a tight market despite the gradual OPEC supply boost.

OPEC+ agreed in the spring of 2020 to cumulatively cut a historic nearly 10 million barrels per day of crude production as it faced a pandemic-induced crash in oil prices. The alliance gradually whittled down the cuts to about 5.8 million barrels per day.

The 19th OPEC and non-OPEC ministerial meeting noted that worldwide oil demand showed “clear signs of improvement and OECD stocks falling, as the economic recovery continued in most parts of the world” thanks to accelerating vaccination programs.

International benchmark Brent crude is up 43% year-to-date and up more than 60% from this time last year, with many forecasters expecting to see oil trading at $80 a barrel in the second half of 2021.

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