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Crude Oil

U.S. Crude Stocks Rise: Will OPEC+ Production Cuts Counterbalance the Oversupply?

Brent crude oil, against which Nigerian oil is priced, declined by 0.5% to $85.13 a barrel, while U.S. West Texas Intermediate (WTI) crude slipped by 0.6% to $78.57



Crude oil - Investors King

Oil prices faced a second-day drop on Wednesday due to the overwhelming signs of surplus U.S. supplies and expectations of increased interest rates, which reduced the losses in the market.

The U.S. crude stock numbers surpassed the anticipated figures with an increment of 10.5 million barrels, which indicated that the U.S. is “swimming in oil.”

Brent crude oil, against which Nigerian oil is priced, declined by 0.5% to $85.13 a barrel, while U.S. West Texas Intermediate (WTI) crude slipped by 0.6% to $78.57, down by more than a dollar in earlier trading. These drops came as a result of the potential tightening of the market and the increased demand growth forecasts for 2023.

On the other hand, U.S. inflation data and comments from central bank officials indicating that interest rates would increase for a longer period also weighed heavily on the market.

This week, the U.S. announced the sale of 26 million barrels of oil from the nation’s strategic reserve, which already stands at its lowest level in four decades. The announcement is expected to put more pressure on crude prices. The surplus in U.S. crude stock numbers and the sale of the strategic reserve could lead to further market disruption.

However, the International Energy Agency (IEA) reported a forecast for a 2023 increase in oil demand growth, which could counterbalance the oversupply situation. The restrained OPEC+ production, coupled with the shut-in production from OPEC+ member Russia, could cause a supply deficit in the second half of the year.

The IEA predicts that about 1 million barrels per day (bpd) of production from Russia will be shut in by the end of the first quarter due to a European ban on seaborne imports and a G7 price cap over the invasion of Ukraine.

OPEC also raised its projection for global oil demand growth, which could indicate a tighter market in 2023. However, there is still much uncertainty about the future of the oil market, and investors need to remain cautious.

The oversupply situation in the U.S. crude market is likely to continue, but the OPEC+ production cuts and the shut-in production from Russia could counterbalance the oversupply situation in the second half of 2023.

The increase in oil demand growth forecasted by the IEA and OPEC also provides some hope for a potentially tighter market. Nevertheless, investors must keep a watchful eye on the market as it remains volatile, and the future remains uncertain.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq,, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Dangote Mega Refinery in Nigeria Seeks Millions of Barrels of US Crude Amid Output Challenges



Dangote Refinery

The Dangote Mega Refinery, situated near Lagos, Nigeria, is embarking on an ambitious plan to procure millions of barrels of US crude over the next year.

The refinery, established by Aliko Dangote, Africa’s wealthiest individual, has issued a term tender for the purchase of 2 million barrels a month of West Texas Intermediate Midland crude for a duration of 12 months, commencing in July.

This development revealed through a document obtained by Bloomberg, represents a shift in strategy for the refinery, which has opted for US oil imports due to constraints in the availability and reliability of Nigerian crude.

Elitsa Georgieva, Executive Director at Citac, an energy consultancy specializing in the African downstream sector, emphasized the allure of US crude for Dangote’s refinery.

Georgieva highlighted the challenges associated with sourcing Nigerian crude, including insufficient supply, unreliability, and sometimes unavailability.

In contrast, US WTI offers reliability, availability, and competitive pricing, making it an attractive option for Dangote.

Nigeria’s struggles to meet its OPEC+ quota and sustain its crude production capacity have been ongoing for at least a year.

Despite an estimated production capacity of 2.6 million barrels a day, the country only managed to pump about 1.45 million barrels a day of crude and liquids in April.

Factors contributing to this decline include crude theft, aging oil pipelines, low investment, and divestments by oil majors operating in Nigeria.

To address the challenge of local supply for the Dangote refinery, Nigeria’s upstream regulators have proposed new draft rules compelling oil producers to prioritize selling crude to domestic refineries.

This regulatory move aims to ensure sufficient local supply to support the operations of the 650,000 barrel-a-day Dangote refinery.

Operating at about half capacity presently, the Dangote refinery has capitalized on the opportunity to secure cheaper US oil imports to fulfill up to a third of its feedstock requirements.

Since the beginning of the year, the refinery has been receiving monthly shipments of about 2 million barrels of WTI Midland from the United States.

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Oil Prices Hold Steady as U.S. Demand Signals Strengthening



Crude Oil - Investors King

Oil prices maintained a steady stance in the global market as signals of strengthening demand in the United States provided support amidst ongoing geopolitical tensions.

Brent crude oil, against which Nigerian oil is priced, holds at $82.79 per barrel, a marginal increase of 4 cents or 0.05%.

Similarly, U.S. West Texas Intermediate (WTI) crude saw a slight uptick of 4 cents to $78.67 per barrel.

The stability in oil prices came in the wake of favorable data indicating a potential surge in demand from the U.S. market.

An analysis by MUFG analysts Ehsan Khoman and Soojin Kim pointed to a broader risk-on sentiment spurred by signs of receding inflationary pressures in the U.S., suggesting the possibility of a more accommodative monetary policy by the Federal Reserve.

This prospect could alleviate the strength of the dollar and render oil more affordable for holders of other currencies, consequently bolstering demand.

Despite a brief dip on Wednesday, when Brent crude touched an intra-day low of $81.05 per barrel, the commodity rebounded, indicating underlying market resilience.

This bounce-back was attributed to a notable decline in U.S. crude oil inventories, gasoline, and distillates.

The Energy Information Administration (EIA) reported a reduction of 2.5 million barrels in crude inventories to 457 million barrels for the week ending May 10, surpassing analysts’ consensus forecast of 543,000 barrels.

John Evans, an analyst at PVM, underscored the significance of increased refinery activity, which contributed to the decline in inventories and hinted at heightened demand.

This development sparked a turnaround in price dynamics, with earlier losses being nullified by a surge in buying activity that wiped out all declines.

Moreover, U.S. consumer price data for April revealed a less-than-expected increase, aligning with market expectations of a potential interest rate cut by the Federal Reserve in September.

The prospect of monetary easing further buoyed market sentiment, contributing to the stability of oil prices.

However, amidst these market dynamics, geopolitical tensions persisted in the Middle East, particularly between Israel and Palestinian factions. Israeli military operations in Gaza remained ongoing, with ceasefire negotiations reaching a stalemate mediated by Qatar and Egypt.

The situation underscored the potential for geopolitical flare-ups to impact oil market sentiment.

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Shell’s Bonga Field Hits Record High Production of 138,000 Barrels per Day in 2023



oil field

Shell Nigeria Exploration and Production Company Limited (SNEPCo) has achieved a significant milestone as its Bonga field, Nigeria’s first deep-water development, hit a record high production of 138,000 barrels per day in 2023.

This represents a substantial increase when compared to 101,000 barrels per day produced in the previous year.

The improvement in production is attributed to various factors, including the drilling of new wells, reservoir optimization, enhanced facility management, and overall asset management strategies.

Elohor Aiboni, Managing Director of SNEPCo, expressed pride in Bonga’s performance, stating that the increased production underscores the commitment of the company’s staff and its continuous efforts to enhance production processes and maintenance.

Aiboni also acknowledged the support of the Nigerian National Petroleum Company Limited and SNEPCo’s co-venture partners, including TotalEnergies Nigeria Limited, Nigerian Agip Exploration, and Esso Exploration and Production Nigeria Limited.

The Bonga field, which commenced production in November 2005, operates through the Bonga Floating Production Storage and Offloading (FPSO) vessel, with a capacity of 225,000 barrels per day.

Located 120 kilometers offshore, the FPSO has been a key contributor to Nigeria’s oil production since its inception.

Last year, the Bonga FPSO reached a significant milestone by exporting its 1-billionth barrel of oil, further cementing its position as a vital asset in Nigeria’s oil and gas sector.

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