Oil prices pared losses on Friday after OPEC and allies, together known as OPEC+, agreed to stick to a gradual increase of global crude oil supply despite calls from the U.S to pump more oil. The group agreed to stick to their plan of raising oil production by 400,000 barrels per day from December.
Brent crude oil gained $1.73, or 2.2 percent to $82.61 a barrel as at 6:29 pm Nigerian, while the US West Texas Intermediate crude (WTI) appreciated by $2.08 or 2.6 percent to $80.40 per barrel.
OPEC+ has refused all calls to up production enough to match global demand following the devastating effect of COVID-19 on the world economy.
In the U.S, retail gasoline prices are averaging around $3.50 a gallon, forcing U.S President Joe Biden to urge energy producers in G20 with spare capacity to increase production.
“Markets know that release of strategic reserves can only have a temporary bearish effect on prompt prices and is not a lasting solution for an imbalance between supply and demand,” Rystad Energy’s head of oil markets Bjornar Tonhaugen said in a note.
“Luckily for consumers, the current deficit in the total oil market, which looks set to persist through December, will not last for long,” Tonhaugen added.
Oil prices rose to a seven-year high last week but dropped after data showed an increase in U.S. crude oil inventories and signs that high prices could encourage higher production elsewhere.
Nigeria Records Zero Revenue from Oil Export in September
Nigeria was unable to obtain any revenue from oil exports throughout the month of October, despite recording an average daily oil production of 1.4 million barrels in the month of September.
The Nigerian National Petroleum Corporation (NNPC) revealed this in the corporation’s report to the Federal Account Allocation Committee (FAAC) which was released over the weekend. The report, which was published on the corporation’s website confirmed that even though it had produced more than 1 million barrels of crude oil, it was unable to sell the oil.
This reminds one of 2019, where more than 104 million barrels of oil which were lifted were unable to be accounted for by the NNPC in an auditor general report that was released recently. The NNPC revelation is similar to the auditor general’s 2019 report, concerning why there was no record of any money received for more than the 104 million barrels of oil that had been lifted.
A part of the report reads: “Sales receipt: No Crude Oil export revenue for the month of September 2021.”
The report went ahead to note that in total, the NNPC crude oil lifting of 11.49 million barrels in Export & Domestic Crude in September 2021 saw an increase of 98.5 percent relative to the 5.79 million barrels lifted in August 2021.
In spite of the lack of revenue for the NNPC through oil exports, the report stated that a sum of N252.96 billion was the Gross Domestic Crude Oil and Gas revenue for October 2021.
In the report, NNPC stated that Domestic Gas and other receipts throughout the month sat as N6.78 billion. Domestic Gas (NGL) in the month was just over N4 billion.
Concerning expenses, the NNPC stated that strategic holding cost, pipeline repairs across the month of September took a total of N7.75 billion. It broke the expenses down, stating that the pipelines came at a cost of N143 million and a value shortfall of N163 billion.
Oil Gains on Saudi Arabia Price Increase
Crude oil rose on the back of Saudi Arabia’s announcement that it has increased January oil prices to Asian and US customers.
Brent crude oil, a global benchmark against which Nigerian oil is priced, appreciated to $71.90 a barrel on Monday at 12:12 pm Nigerian time after plunging to as low as $65.73 a barrel on Thursday.
Saudi Arabia on Sunday announced it had raised January official selling prices for all crude oil grades sold to Asia and the United States by up to 80 cents from the previous month.
This was on the same day reports from South Africa suggested that Omicron was less harsh than previously thought. Still, it was uncertain why one of the world’s leading oil producers raised prices at a time OPEC + is upping production by 400,000 barrels per day and when uncertainty surrounding covid could erode global demand and force existing buyers to embrace competing grades.
“I am struggling to construct a positive narrative out of Saudi Arabia raising prices, especially as it makes competing grades more appealing to their client base. The best I can do is that Saudi Arabia feels confident raising prices despite higher OPEC+ production because it believes omicron is a storm in a test tube and that the global recovery will not be derailed. The South African reports have reinforced that sentiment,” said Jeffrey Halley, Senior Market Analyst, Asia Pacific, OANDA.
US equity and Asian assets responded positively to Omicron’s report this morning, curbing further decline in the global assets from Friday’s decline. However, there is no certainty on the virus given the sample size. More research is needed to better understand the characteristics of the Omicron.
US Fed is now expected to raise interest rates twice in 2022 if it will curtail escalating inflation rate and compel more people to go back to work. Investors are now waiting for Friday’s consumer price report.
Nigeria’s Oil Production Increase – Report
The most recent monthly survey conducted by Reuters has revealed that the Organization of Petroleum Exporting Countries (OPEC) continued to increase its oil production in November under the OPEC+ agreement, but the organization went on pumping less crude oil than its share of the monthly increase just as Nigeria started to see an increase in production.
The country’s oil production had been short until last month when Shell Petroleum Development Company of Nigeria (SPDC) resumed crude exports from the Bonny Light terminal after repairs to a pipeline that had started leaking.
Issues with operation have hindered the country’s crude oil production throughout the second half of the year, with disturbances at other terminals including Forcados, Brass River, Erha, and Qua Iboe.
In the last few months, Nigeria’s production has been below the budgetary benchmark, dropping to 1.37 million barrels per day in October. That rate is 261,000 bpd (barrels per day) below the country’s OPEC+ quota.
Under the OPEC+, the 10 members of the Organization who have been bound by the OPEC+ agreement should be increasing their joint production by 254,000 bpd every month out of the total OPEC+ monthly supply addition of 400,000 bpd.
In November, OPEC’s oil production went up by 220,000 bpd to 27.74 million bpd according to the survey conducted by Reuters. That rise once again fell short of the 254,000 rise which OPEC is expected to implement.
The Reuters survey affirms a trend which began a few months ago, that not all members of the Organization have the ability to produce to their full quotas.
Saudi Arabia, which is OPEC’s top producer and the default leader, saw the biggest increase in production in November. The increase was in line with the country’s target, and the same was seen in Iraq which is OPEC’s second-largest oil producer.
Nigerian production managed a recovery in November from constraints seen in October, but other African oil producers kept on struggling to produce to their targets.
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