Rivers Governor Nyesom Wike has declared war on the rampant oil theft and illegal refining leading to billions in lost revenues for Nigeria and contributing disastrous environmental pollution.
Nigeria is Africa’s top oil producer and reports indicate that the West African country loses as many as 150000 barrels of crude per day to criminals. The little quantities stolen are taken to substandard refineries and processed to gasoline, diesel and kerosene which during the process, contributes to environmental pollution for locals in the Niger Delta region.
Governor Wike, explaining these actions disclosed that “It is sabotage to the nation’s economy and very dangerous to the health of the people. We cannot sit down and see our people dying with all kinds of ailments,” at the state capital, Port Harcourt.
Oil theft is one of the things that has contributed to low revenue from Nigeria as criminals tap into pipelines crisscrossing Rivers and other southern states. The country estimates that the missing barrels are worth almost $6.8 billion a year. Some experts, however, believe that the scale of the theft is even more than what the government estimates.
Nigerian Chief of Defence Staff Lucky Irabor, had also disclosed that the theft of oil in Rivers contributes to abysmally low production in the country. A government-backed data in 2021 reveals that the country only produced about 1.5 million barrels a day of crude equivalent in December, down from around 1.7 million barrels at the start of 2021. This is coming from a country with a capacity of 2.5 million barrels a day.
However, there has been improvement since January 2022, even though performance remains below the quota set by OPEC+ for Nigeria.
It is pretty clear that oil theft not only erodes current output but also discourages investment in future production in Nigeria.
Wike’s commitment to fighting oil theft in Nigeria is coming as fitting when you consider that only recently, Nigeria’s Petroleum Minister, Timipre Sylva have called on the Turkish government to consider investing in Nigeria’s oil assets after some notable International Oil Companies (IOCs) have declared divestments in Nigeria’s oil assets.
Governor Nyesom Wike also stated that “It is clear that certain politicians are involved” in the illicit trade. “It’s also clear that some security agencies are involved,” he disclosed.
The governor blamed President Muhammadu Buhari-led’s administration to have failed in tackling oil theft and this failure is forcing the Rivers governor to act.
Oil Prices Recover Slightly Amidst Demand Concerns in U.S. and China
Oil Prices Continue Slide as Market Skepticism Grows Over OPEC+ Cuts
Global oil markets witnessed a continued decline on Wednesday as investors assessed the impact of extended OPEC+ cuts against a backdrop of diminishing demand prospects in China.
Brent crude oil, the international benchmark for Nigerian crude oil, declined by 63 cents to $76.57 a barrel while U.S. WTI crude oil lost 58 cents to $71.74 a barrel.
Last week, the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, agreed to maintain voluntary output cuts of approximately 2.2 million barrels per day through the first quarter of 2024.
Despite this effort to tighten supply, market sentiment remains unresponsive.
“The decision to further reduce output from January failed to stimulate the market, and the recent, seemingly coordinated, assurances from Saudi Arabia and Russia to extend the constraints beyond 1Q 2024 or even deepen the cuts if needed have also fallen to deaf ears,” noted PVM analyst Tamas Varga.
Adding to the unease, Saudi Arabia’s decision to cut its official selling price (OSP) for flagship Arab Light to Asia in January for the first time in seven months raises concerns about the struggling demand for oil.
Amid the market turmoil, concerns over China’s economic health cast a shadow, potentially limiting fuel demand in the world’s second-largest oil consumer.
Moody’s recent decision to lower China’s A1 rating outlook from stable to negative further contributes to the apprehension.
Analysts will closely watch China’s preliminary trade data, including crude oil import figures, set to be released on Thursday.
The outcome will provide insights into the trajectory of China’s refinery runs, with expectations leaning towards a decline in November.
Russian President Vladimir Putin’s diplomatic visit to the United Arab Emirates and Saudi Arabia has added an extra layer of complexity to the oil market dynamics.
Discussions centered around the cooperation between Russia, the UAE, and OPEC+ in major oil and gas projects, highlighting the intricate geopolitical factors influencing oil prices.
U.S. Crude Production Hits Another Record, Posing Challenges for OPEC
U.S. crude oil production reached a new record in September, surging by 224,000 barrels per day to 13.24 million barrels per day.
The U.S. Energy Information Administration reported a consecutive monthly increase, adding 342,000 barrels per day over the previous three months, marking an annualized growth rate of 11%.
The surge in domestic production has led to a buildup of crude inventories and a softening of prices, challenging OPEC⁺ efforts to stabilize the market.
Despite a decrease in the number of active drilling rigs over the past year, U.S. production continues to rise.
This growth is attributed to enhanced drilling efficiency, with producers focusing on promising sites and drilling longer horizontal well sections to maximize contact with oil-bearing rock.
While OPEC⁺ production cuts have stabilized prices at relatively high levels, U.S. producers are benefiting from this stability.
The current strategy seems to embrace non-OPEC non-shale (NONS) producers, similar to how North Sea producers did in the 1980s.
Saudi Arabia, along with its OPEC⁺ partners, is resuming its role as a swing producer, balancing the market by adjusting its output.
Despite OPEC’s inability to formally collaborate with U.S. shale producers due to antitrust laws, efforts are made to include other NONS producers like Brazil in the coordination system.
This outreach aligns with the historical pattern of embracing rival producers to maintain control over a significant share of global production.
In contrast, U.S. gas production hit a seasonal record high in September, reaching 3,126 billion cubic feet.
However, unlike crude, there are signs that gas production growth is slowing due to very low prices and the absence of a swing producer.
Gas production increased by only 1.8% in September 2023 compared to the same month the previous year.
While the gas market is in the process of rebalancing, excess inventories may persist, keeping prices low.
The impact of a strengthening El Niño in the central and eastern Pacific Ocean could further influence temperatures and reduce nationwide heating demand, impacting gas prices in the coming months.
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