Nigeria Maintains Position as Africa’s Topmost Oil Producer, but Falls Short of OPEC Quota in February
The Organisation of Petroleum Exporting Countries (OPEC) recently released its Monthly Oil Market Report, confirming that Nigeria produced 1.3 million barrels per day (bpd) of crude oil in February, in line with the country’s self-reported data. This cements Nigeria’s position as Africa’s topmost producer, outperforming Algeria and Angola.
However, despite Nigeria’s performance, it underperformed by as much as 500,000 bpd, given its OPEC quota of 1.8 million bpd for the month under consideration. This raises concerns about the country’s ability to meet its targets and contribute to the OPEC+ agreement.
OPEC’s report also projected that world oil demand in 2023 will rise by 2.32 million bpd, or 2.3%, unchanged from last month’s forecast. Investors King understands that while better-than-expected Chinese growth could enhance the oil market this year, crude prices fell this week as the collapse of Silicon Valley Bank sparked fears of a fresh financial crisis.
China, the largest importer of crude oil, is expected to help oil demand grow by 710,000 bpd in 2023, up from last month’s forecast of 590,000 bpd and a contraction in 2022, according to OPEC.
Despite output cuts by the wider OPEC+ group, OPEC’s oil production rose in February as its crude oil output increased by 117,000 bpd to 28.92 million bpd, largely bolstered by the recovery recorded in Nigeria. However, Nigeria, Angola, and other members are still struggling to attain their targets, resulting in OPEC’s total output hovering below its OPEC+ agreement level.
OPEC’s report also warned that the rising trend in inflation, ongoing external and fiscal pressures, and deteriorating global macroeconomic conditions are expected to lead to slowing economic activity in Nigeria in 2023.
Meanwhile, Moody’s Investors Service has placed six US banks on review for potential credit rating downgrades in the wake of last week’s collapse of Silicon Valley Bank.
This event impacted the price of Nigeria’s oil benchmark, Brent, which fell nearly 2% in volatile trading on Monday and raised fears of a fresh financial crisis.
Oil Prices Remain Steady Ahead of U.S. Inflation Data
Oil prices were holding steady on Friday as investors awaited the release of key U.S. inflation data that could provide clues on future interest rate moves.
Brent crude oil, the international benchmark for Nigerian oil, which has risen by almost 6% this week was up by 0.2% at $79.45 a barrel, while West Texas Intermediate crude oil rose by 0.7% to $74.89.
Concerns about a full-blown global banking crisis have abated after banks in the U.S. and Europe were rescued, and oil prices have broadly recouped losses that followed the largest bank failures since the 2008 financial crisis.
Oil prices have also been supported by the shutdown or reduction of output at several oilfields in the semi-autonomous Kurdistan region of northern Iraq following a halt to the northern export pipeline.
Data has shown that U.S. crude oil stockpiles have fallen to a two-year low while China’s manufacturing activity rose in March.
Investors are now waiting for the U.S. personal consumption expenditures (PCE) figures due later today to decipher market direction. Economists polled by Reuters expect the core PCE index to ease to 0.4% in February from January and stay broadly steady on an annual basis at 4.7%.
On Thursday, the U.S. House of Representatives passed a bill intended to boost U.S. oil and gas production while scaling back climate initiatives.
Sources have suggested that with oil prices recovering from recent lows, the Organization of the Petroleum Exporting Countries and allies led by Russia are likely to stick to their existing deal to cut oil output at a meeting on Monday.
Investors will be closely monitoring the outcome of this meeting and any further developments that may impact oil prices.
Oil Prices Rise on Unexpected U.S. Crude Stockpile Drop and Halt in Iraqi Exports
Oil prices increased on Thursday due to a surprise decline in U.S. crude stockpiles and a stoppage in exports from the Kurdistan region of Iraq that outweighed a smaller-than-expected cut in Russian supplies.
Brent crude oil, against which Nigerian oil is priced, climbed 0.51% to $78.68 a barrel while West Texas Intermediate crude oil rose 0.71% to $73.49 a barrel.
The Energy Information Administration revealed on Wednesday that U.S. crude oil stockpiles had dropped unexpectedly in the week ended March 24 to a two-year low.
Analysts had predicted a 100,000-barrel increase, but the inventory dropped by 7.5 million barrels.
Also, exports from Iraq’s northern region remained suspended due to oilfield producers shutting down or decreasing production following a stoppage to the northern export pipeline.
The Kurdistan-Iraq premium in oil prices, however, may vanish sooner than anticipated, as analysts from Citi predicted that pipeline flows could grow by around 200,000 barrels per day due to changes in Iraq’s domestic politics, which could lead to a durable political settlement.
Although the lower-than-expected cut to Russian crude oil production caused bearish sentiment, it was offset by the unexpected U.S. crude stockpile drop and halt in Iraqi exports.
The 300,000 barrels per day production decline in the first three weeks of March represented around 5% of Russian output, compared to targeted cuts of 500,000 barrels per day.
UBS stated that they anticipate rising Chinese crude imports and lower Russian production to boost prices over the coming quarters, despite the potential for near-term volatility in oil prices.
Meanwhile, markets will keep an eye on U.S. spending and inflation data scheduled for Friday and their impact on the value of the U.S. dollar.
NNPCL Intensifies Oil Exploration, Targets 50 Billion Barrels Reserves
The Nigerian National Petroleum Company Limited, NNPCL has intensified efforts to boost the nation’s crude oil reserves to 50 billion barrels.
Investors King gathered that the NNPCL has drawn out plans to move from the 37 billion barrels of oil reserves to 50 billion barrels through its recent projects.
This is as the national oil company launched officially the spud-in (drilling) for crude oil in the Ebenyi-A Well in Obi Local Government Area of Nasarawa State.
Speaking at the event on Tuesday, the Group Chief Executive Officer, NNPCL, Mele Kyari stated that the new drilling rig at the Ebenyi-A Well site will increase Nigeria’s oil output to about three million barrels per day.
In November 2022, the national oil company inaugurated the Kolmani oil well located between Bauchi and Gombe states to also improve the nation’s oil reserves, Investors King recalls.
Kyari noted that the Ebenyi-A Well will greatly aid the NNPCL in attaining its 50 million barrels oil reserves target.
He spoke on the collaboration between NNPC Limited and Nigeria Upstream Petroleum Regulatory Commission (NURPC) for better oil exploration activities through the use of technology for the nation’s frontier basins which cuts across the Chad Basin, Upper and Lower Benue troughs, Bida Basin, the Sokoto Basin, Dahomey, Anambra platform, Calabar embankment and the Ultra deep water Niger Delta.
Kyari disclosed that the directive of President Muhammadu Buhari on the mobilisation for re-entry into the Chad Basin had been enacted and the entry had begun.
Buhari, who addressed the attendees virtually said the Ebenyi-A Well of the Middle Benue Trough will further aid the exploration of crude and gas in the frontier basins across Nigeria.
He commended the efforts of the NNPCL and support of the government and people of Nasarawa State towards the success of the oil exploration
His words, “Today’s occasion marks the official commencement of exploration drilling activities in the Middle Benue Trough. This is consistent with the commercial discoveries of hydrocarbons in the Kolmani Area of the Upper Benue Trough.
“I am pleased to note that activities are currently ongoing to develop the Kolmani petroleum discoveries to commercial production to add to the nation’s considerable hydrocarbon assets.
“The consequent positive outcomes of these drilling campaigns will lead to greater prosperity for our people and especially enhance overall energy security for our country.”
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