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Nigerian Oil and Gas Sector Rebounds from Record Decline, Gains 37.61 Percent Year to Date

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Eternal Oil - Investors King

The rebound in global oil prices following a record decline in the price of the commodity in 2020 has helped bolstered the Nigerian oil and gas sector in the first half of the year.

The sector gained 37.61 percent to emerge as the biggest gainer in the first half of 2021 despite Nigeria’s weak macroeconomic fundamentals.

The gauge of the sector, the Nigerian Exchange Limited oil and gas index, rose from 226.41 index points on January 4th, 2021 to 311.28 index points on Friday, 2nd July 2021.

Brent crude oil, against which Nigerian oil is priced, slipped by 0.11 percent to $76.09 per barrel, while U.S. crude futures dipped 0.13 percent to $75.06 per barrel on Monday morning.

The slight decline was as a result of Saudi Arabia and UAE’s disagreement over when the current accord between OPEC+ should expire.

the UAE’s Energy Minister Suhail Al Mazrouei had said it would be unfair to extend the current cuts beyond April as it would affect his country which he claims has “sacrificed the most, making one-third of our production idle for two years”.

“We can’t make a new agreement under the same conditions – we have a sovereign right to negotiate that,” he said.

However, Saudi Arabia is pushing for OPEC to raise output by some 2 million barrels per day from August to December 2021 but extend remaining cuts to the end of 2022.

Under a proposed OPEC Plus deal, the UAE would proportionally cut its oil production by 18 percent, while Saudi Arabia would cut its output by 5 percent.

Negotiations over the dispute are set to resume on Monday.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Crude Oil

Sirius Petroleum and Baker Hughes Collaborate on OML 65 Drilling in Nigeria

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Sirius Petroleum, the Africa-focused oil and gas production and development company, has signed a memorandum of understanding with Baker Hughes. The MoU names Baker Hughes as the approved service provider for Phase 1 of the Approved Work Program (AWP) of the OML 65 permit, a large onshore block in the western Niger Delta, Nigeria. Baker Hughes will provide a range of drilling and related services at a mutually agreed upon pricing structure to deliver the initial nine-well program.

Sirius has signed various legal agreements with COPDC, a Nigerian joint venture, to implement this program. COPDC has signed a Financial and Technical Services Agreement (FTSA) with the Nigerian Petroleum Development Company (NPDC) for the development and production of petroleum reserves and resources on OML 65. The FTSA includes an AWP which provides for development in three phases of the block. and Sirius has entered into an agreement with the joint venture to provide financing and technical services for the execution of the PTA.

The joint venture will initially focus on the redevelopment of the Abura field, involving the drilling and completion of up to nine development wells, intended to produce the remaining 2P reserves of 16.2 Mbbl, as certified by Gaffney Cline and Associates (GCA) in a CPR dated June 2021.

Commenting, Toks Azeez, Sales & Commercial Executive of Baker Hughes, said: “We are extremely happy to have been selected for this project with Sirius and their JV partners. This project represents an important step towards providing our world-class integrated well-service solutions in one of the most prolific fields in the Niger Delta. Baker Hughes’ technological efficiency and execution excellence will help Sirius improve its profitability and competitiveness in the energy market.”

Bobo Kuti, CEO of Sirius, commented: “We are delighted to have secured the services of one of the world’s leading energy technology companies to work with our joint venture team to deliver the approved work program on the block. OML 65. We look forward to building a long and mutually beneficial partnership with Baker Hughes.”

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Oil Rises on U.S. Fuel Drawdowns Despite Surging Coronavirus Cases

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Oil prices climbed on Wednesday after industry data showed U.S. crude and product inventories fell more sharply than expected last week, reinforcing expectations that demand will outstrip supply growth even amid a surge in Covid-19 cases.

U.S. West Texas Intermediate (WTI) crude futures rose 48 cents, or 0.7%, to $72.13 a barrel, reversing Tuesday’s 0.4% decline.

Brent crude futures rose 34 cents, or 0.5%, to $74.82 a barrel, after shedding 2 cents on Tuesday in the first decline in six days.

Data from the American Petroleum Institute industry group showed U.S. crude stocks fell by 4.7 million barrels for the week ended July 23, gasoline inventories dropped by 6.2 million barrels and distillate stocks were down 1.9 million barrels, according to two market sources, who spoke on condition of anonymity.

That compared with analysts’ expectations for a 2.9 million fall in crude stocks, following a surprise rise in crude inventories the previous week in what was the first increase since May.

Traders are awaiting data from the U.S. Energy Information Administration (EIA) on Wednesday to confirm the drop in stocks.

“Most energy traders were unfazed by last week’s build, so expectations should be high for the EIA crude oil inventory data to confirm inventories resumed their declining trend,” OANDA analyst Edward Moya said in a research note.

On gasoline stocks, analysts had expected a 900,000 barrel decline drop in the week to July 23.

“The U.S. is still in peak driving season and everyone is trying to make the most of this summer,” Moya said.

Fuel demand expectations are undented by soaring cases of the highly infectious delta variant of the coronavirus in the United States, where the seven-day average for new cases has risen to 57,126. That is about a quarter of the pandemic peak.

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Oil Price Rises To $74.70 Despite Delta Variant

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Oil price inched higher on Tuesday despite the fast spreading COVID-19 Delta variant. Brent crude oil, against which Nigerian oil is priced gained, $0.20 or 0.27 percent to $74.70 per barrel on Tuesday at 12:05 am Nigerian time.

Delta variant is spreading in China, the world’s largest importer of crude oil, forcing crude oil investors to start cutting down on their oil demand projections.

The Delta variant is still spreading and China has started to clamp down on teapots, so their import growth would not be that much,” said Avtar Sandu, a senior commodities manager at Singapore’s Phillips Futures, referring to independent refiners.

Strong U.S. demand and expectations of tight supplies have helped crude oil to recover from a 7 percent slump recorded last Monday to mark their first gains in two to three weeks last week.

Global oil markets are expected to remain in deficit despite a decision by the Organization of the Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+, to raise production through the rest of the year.

There is seemingly a battle within the energy complex between the prevailing supply deficit engineered by OPEC+ and the threat of the COVID-19 Delta variant in regions with low vaccination rates,” said StoneX analyst Kevin Solomon.

The slow take-up of vaccinations will continue to limit some upside in oil demand in those regions, and there will be intermittent spells in the recovery in the coming months.

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