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Nigeria Records Zero Revenue from Oil Export in September

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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.

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Crude Oil

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

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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.

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Crude Oil

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

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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.

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Brent Crude Falls Amid Anticipation of China’s Industrial Output Report

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Brent crude prices fell on Monday, reversing some of last week’s gains as traders anxiously awaited the release of key economic data from China, the world’s largest importer of crude oil.

After climbing 3.8% last week — the first weekly rise in four — Brent crude edged down toward $82 a barrel. Similarly, West Texas Intermediate (WTI) crude was trading near $78 a barrel.

The market’s attention is now focused on China’s scheduled release of industrial output and crude refining figures for May, which are expected to provide crucial insights into the economic health and energy demand of the country.

China’s oil refining — known as crude throughput — is anticipated to be flat or even decline this year for the first time in two decades, excluding the downturn experienced in 2022 due to the COVID-19 pandemic. This projection is based on a survey conducted by Bloomberg among market analysts.

In 2023, China processed a record volume of crude oil as demand rebounded, but signs of robust supply and persistent concerns over Chinese demand have kept oil prices trending lower since early April.

The situation was further complicated by OPEC+’s recent decision to increase output this year, which initially unsettled the market. Key members of the cartel have since clarified that production adjustments could be paused or reversed if necessary.

“Crude has room for growth,” said Gui Chenxi, an analyst at CITIC Futures Co. “The third quarter is typically the peak season globally and should drive oil processing and demand higher.”

Market participants are keenly watching the forthcoming data, as any indications of weakening demand could weigh heavily on prices.

Conversely, stronger-than-expected industrial activity could support prices and offset some of the recent bearish sentiment.

The ongoing uncertainty has led to cautious trading, with investors reluctant to make significant moves until more concrete information is available.

This cautious approach underscores the delicate balance the oil market is trying to maintain amid fluctuating global economic signals.

As the world’s top crude importer, China’s economic performance is a key barometer for global oil demand. The data expected from China will not only influence immediate trading strategies but also provide longer-term market direction.

In the meantime, the oil market remains on tenterhooks, reflecting the broader uncertainties in the global economy.

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