The federal government could lose as much as N1.37 trillion worth of crude oil production as the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) threatens to embark on a nationwide strike amid rising crude oil theft.
PENGASSAN said the industrial action would last for 30 days, except the government addressed the nation’s incessant crude oil theft.
The association zonal chairman, Prince Audu Osihiokhamele, who was present at a sensitization rally held in Warri, Delta State disclosed on Friday.
According to him “the big men doing the business of crude oil theft are in government.
“They say they load vessels, but we don’t see any. Is it a needle?”
Audu further stated that should the authorities fail to take the necessary actions to arrest the crisis, PENGASSAN would be forced to take drastic action.
He said “We will shut down the country for 30 days until we all come to the round table to unravel the mysteries surrounding the thefts.
“PENGASSAN will resort to shutting down production for 30 days by withdrawing members, both onshore and offshore, wherever they are producing crude, should the government fail to hearken to this warning.”
In July 2022, Nigeria’s crude oil production dropped to an all-time low of 972,394 barrels per day, according to a report released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and obtained by Investors King.
Prior to theft and a series of attacks in the Southern part of the country, Nigeria’s crude oil production stood at about 2.1 million barrels per day. However, despite oil trading at a relatively high price in recent months following Russia’s invasion of Ukraine on February 24, 2022, production in Africa’s largest economy has nosedived and continues to trend downward.
This, experts have attributed to an unusually high level of oil theft in key crude oil producing states. Some stakeholders have gone as far as accusing politicians and other government officials of being part-takers or even encouraging it.
Recently, in an effort to curb theft and prop up Nigerian crude oil production, the Federal Government was forced to engage the service of a rebel leader, popularly known as Tompolo.
Tompolo, who was once declared wanted and a criminal, was awarded N48 billion, or $112.123 million in yearly survelliance contract to provide security for government oil assets and investments in the Southern part of the nation.
While this agreement might work in the near term, it could spell doom for the nation in the future like the Boko haram in the North and IPOB in the East.
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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