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Nigeria’s Oil Production Dropped By More Than 10 Percent In August

Nigeria’s oil production dropped by more than 10 percent below the one million mark in August



Crude oil - Investors King

Nigeria’s oil production has been on the decline in the past months. Last month, oil production dropped by more than 10 percent below the one million mark. 

Findings by Investors King show that Nigeria’s oil production in August hit an all-time low of 972,394 barrels per day. 

According to the report by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the drop is more than 10 percent when compared to 1.08 million a day produced in July 2022. 

July production of 1.08 million bpd is nonetheless lower than the country’s quota which was set at 1.8 million bpd by the Organisation of Petroleum Exporting Countries (OPEC). 

The shortfall in Nigeria’s oil production can be significantly attributed to oil theft and pipeline vandalism which started in 2021 and entered a large magnitude this year. 

Investors King had earlier reported that Nigeria lost $3.5 billion dollars to oil theft in 2021.

Meanwhile, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has threatened to shut down oil production in Nigeria for 30 days if the Federal Government fails to curb the lingering massive oil theft in Niger Delta. 

Members of the union staged protests in various parts of Nigeria including Abuja, Warri in Delta State, Kaduna and Port Harcourt in Rivers State. 

Speaking at the sensitisation rally that was held at the Delta State Governor’s Office Annexe in Warri, the PENGASSAN Zonal Chairman, Prince Audu Osihiokhamele, noted with concern that “the big men doing the business of crude oil theft are in government.”

“We will shut down the country for 30 days until we all come to the round table to unravel the mysteries surrounding the thefts,” Osihiokhamele stated.

Findings show that if PENGASSAN shut down oil operations for 30 days, Nigeria might lose about N1.37 trillion. 

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Oil Markets Brace for Potential Resumption of Rally Amid Tightening Supplies



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Oil markets are maintaining their steady course as hedge funds double down on their bets that tightening supplies will reignite the recent rally, despite a slight pause last week.

West Texas Intermediate (WTI) gained 0.7% before settling just above the $90-per-barrel price level following the surge in hedge funds’ bullish positions on WTI, the highest since February 2022.

Brent crude oil, against which Nigerian crude oil is priced, appreciated by 0.53% to $93.76 per barrel.

JPMorgan Chase & Co. is also chiming in, joining the chorus of voices predicting an “oil supercycle.” Oil has surged by over 25% since the end of June, poised for its most substantial quarterly gain since March 2022. This robust performance is credited to supply restrictions implemented by OPEC+ heavyweights Saudi Arabia and Russia, alongside brighter economic prospects in the US and China.

The market buzz is now dominated by discussions of the elusive $100-a-barrel crude, which could have ripple effects, increasing pressure on importing nations.

Analyst Zhou Mi from the Chaos Research Institute in Shanghai remains optimistic, emphasizing Saudi Arabia’s ongoing output cuts and solid demand from both China and the US.

Meanwhile, the physical market echoes these sentiments. Russia’s recent ban on diesel and gasoline exports has already elevated fuel prices, while US crude stockpiles continue to dwindle. The oil market’s backwardated structure further underscores strong competition for immediate supplies.

China is also gearing up for its Golden Week holiday, which is expected to boost jet fuel demand in the world’s largest oil-importing nation. With over 21 million people anticipated to take to the skies during this extended break, the momentum in the air travel sector appears to be continuing.

Saudi Arabia’s Foreign Minister, Faisal bin Farhan, highlighted the role of OPEC and its allies in stabilizing energy markets, underscoring their commitment to ensuring market equilibrium during a recent United Nations speech.

As the world watches these market dynamics unfold, the future of oil prices remains uncertain but decidedly intriguing.

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Oil Prices Rally Amidst Russian Export Ban and Rate Hike Concerns



Crude oil - Investors King

Oil prices saw an upward trend on Friday as concerns over Russia’s ban on fuel exports potentially tightening global supply.

This development overshadowed apprehensions of further interest rate hikes in the United States that could impact demand.

However, despite this bounce, oil prices were still on course for their first weekly decline in four weeks.

Brent crude oil gained 46 cents, or 0.5% to $93.76 per barrel while the U.S. West Texas Intermediate crude (WTI) oil surged by 65 cents, a 0.7% rise to $90.28 a barrel.

These gains were driven by growing concerns regarding tight global supply as the Organization of the Petroleum Exporting Countries and its allies (OPEC+) continued to implement production cuts.

Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd, commented on the volatile nature of the market, stating, “Trading remained choppy amid a tug-of-war between supply fears that were reinforced by a Russian ban on fuel exports and worries over slower demand due to tighter monetary policies in the United States and Europe.”

He further noted that investors would closely monitor OPEC+ production cuts and the impact of rising interest rates, predicting that WTI would trade within a range of approximately $90 to $95.

Russia’s abrupt ban on gasoline and diesel exports to countries outside a select group of four ex-Soviet states had an immediate effect as it aimed to stabilize the domestic fuel market. This export restriction prompted a nearly 5% increase in heating oil futures on Thursday.

Tina Teng, an analyst at CMC Markets, explained, “Crude oil bounced off a session low after Russia banned diesel exports, which included gasoline. The action reversed a downside movement in crude markets following the hawkish Fed decision.”

However, she also warned that mounting concerns about a recession in the Eurozone could continue to exert downward pressure on oil prices.

The U.S. Federal Reserve recently maintained its interest rates but adopted a more hawkish stance, projecting a quarter-percentage-point increase to 5.50%-5.75% by the year-end. This decision heightened fears that higher rates might dampen economic growth and reduce fuel demand.

Also, the stronger U.S. dollar, reaching its highest level since early March, made oil and other commodities more expensive for buyers using alternative currencies.

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NNPCL’s Crude Commitments Create Hurdles for Dangote’s Oil Operations



The Nigerian National Petroleum Company Limited (NNPCL) has found itself at the center of a growing challenge faced by the Dangote Petroleum Refinery, one of Africa’s largest industrial projects.

As the refinery gears up for full-scale production, it is grappling with unforeseen hurdles caused by the commitments made by NNPCL in the form of crude oil agreements with other entities.

Dangote Petroleum Refinery, a flagship project of the Dangote Group led by billionaire Aliko Dangote, is on the brink of becoming a game-changer in Nigeria’s energy sector. With a promise to significantly reduce the country’s dependence on imported petroleum products, the refinery holds the potential to bolster the nation’s energy self-sufficiency.

However, recent revelations have shed light on the complexity of the oil industry in Nigeria and how contractual commitments can disrupt even the best-laid plans.

According to Devakumar Edwin, the Executive Director of the Dangote Group, in an interview with S&P Global Commodity Insights, the NNPCL, which normally trades crude oil on behalf of Nigeria, has pledged its crude to other entities.

While Edwin did not disclose the specific recipients of NNPCL’s crude commitments, it was previously announced that the company had entered into a $3 billion crude oil-for-loan deal with the African Export-Import Bank. Under this agreement, NNPCL agreed to allocate future oil production to the bank as repayment for the loan.

This unforeseen twist has left Dangote Petroleum Refinery in a predicament, necessitating the temporary importation of crude oil.

Edwin, however, stated that this importation is only a short-term solution, as the refinery expects to receive crude supply from NNPCL starting in November 2023.

The refinery’s ambitious plans include producing up to 370,000 barrels per day of crude, which will be processed into Automotive Gas Oil (diesel) and jet fuel by October 2023. By November 30, 2023, the plant aims to produce Premium Motor Spirit (petrol), providing a much-needed boost to the domestic fuel market.

While the Dangote Group remains committed to its objectives, the delays caused by NNPCL’s prior commitments have raised concerns among oil marketers.

They believe that the prices of diesel and jet fuel, in particular, will only experience a significant reduction once the refinery begins receiving crude oil supplies from Nigeria rather than importing it.

Despite these temporary setbacks, Edwin reaffirmed the refinery’s readiness to receive crude oil, stating, “Right now, I’m ready to receive crude. We are just waiting for the first vessel. And so, as soon as it comes in, we can start.”

In essence, the shift in the refinery’s original timeline can be attributed to the prior commitments made by NNPCL, causing a momentary delay.

However, it remains a beacon of hope for Nigeria’s energy sector, promising a reliable supply of environmentally-friendly refined products and a substantial influx of foreign exchange into the country.

Devakumar Edwin also underscored that the revenues generated from the refinery’s operations would be reinvested in further developments, reaffirming Aliko Dangote’s unwavering commitment to Nigeria’s economic growth.

As the nation eagerly awaits the commencement of production at the Dangote Petroleum Refinery, it is clear that the complex web of oil industry contracts and commitments has played an unexpected role in shaping the refinery’s journey towards becoming a transformative force in Nigeria’s energy landscape.

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