The Nigerian Bureau of Statistics (NBS) has released its highly anticipated 2023 second-quarter Gross Domestic Product (GDP) report, revealing a significant decline in Nigeria’s oil production.
According to the report, Nigeria’s average daily oil production dropped by 14.69 percent year-on-year (YoY) to 1.22 million barrels per day (mb/d) in the second quarter of 2023. This marks a notable decrease from the 1.43 mb/d recorded during the corresponding period in 2022.
The NBS’s report stated that “The nation, in the second quarter of 2023, recorded an average daily oil production of 1.22 million barrels per day (mbpd), lower than the daily average production of 1.43 mbpd recorded in the same quarter of 2022 by 0.22 mbpd and lower than the first quarter of 2023 production volume of 1.51 mbpd by 0.29 mbpd.”
The oil sector‘s real growth was reported to be -13.43 percent YoY in Q2 2023, indicating a decrease of 1.66 percent points compared to the rate recorded in the corresponding quarter of 2022 (-11.77 percent).
Also, this represents a sharp decline of 9.22 percent points when compared to the growth rate in Q1 2023, which stood at -4.21 percent.
On a quarter-on-quarter basis, the oil sector recorded a growth rate of -14.12 percent in Q2 2023.
In terms of its contribution to the overall real GDP, the oil sector made up 5.34 percent in Q2 2023. This percentage is down from the figures recorded during the same period in 2022 and the preceding quarter, where it contributed 6.33 percent and 6.21 percent, respectively.
Regarding the mining sector, the report notes that it encompasses Crude Petroleum and Natural Gas, Coal Mining, Metal Ore, Quarrying, and other Minerals sub-activities.
In Q2 2023, this sector experienced a nominal decline of -7.11 percent YoY. Metal Ores exhibited the highest growth rate among the sub-activities at 186.40 percent, followed by quarrying and other minerals activities at 60.83 percent.
However, Crude Petroleum and Natural Gas remained the primary contributors to the sector, accounting for 85.80 percent in Q2 2023. When comparing the growth rate in Q2 2023 to Q2 2022 and Q1 2023, there was a noticeable decline of 56.86 percent points and a fall of 3.59 percent points, respectively.
The Mining & Quarrying sector contributed 6.58 percent to the overall GDP in the second quarter of 2023. This is a decrease compared to the contributions recorded in the second quarter of 2022 at 8.20 percent and the previous quarter at 6.73 percent.
In real terms, the Mining and Quarrying sector contracted by -12.16 percent YoY in the second quarter of 2023.
In comparison to the same quarter of 2022 and the first quarter of 2023, it was lower by 1.07 percent points and lower by 8.20 percent points, respectively. Quarter-on-quarter, the growth rate recorded was -11.11 percent during the quarter.
The contribution of Mining and Quarrying to Real GDP in the quarter under review stood at 5.58 percent, lower than the rate of 6.51 percent recorded in the corresponding quarter of 2022 and lower than the 6.26 percent recorded in the first quarter of 2023.
These statistics underscore the challenges faced by Nigeria’s oil and mining sectors in the second quarter of 2023, raising important economic concerns for the nation.
Oil Prices Surge as China’s Holiday Demand and Tight US Supply Drive 2% Weekly Gain
Oil prices to close the week with about a 2% gain as robust holiday demand from China and constrained U.S. fundamentals overshadowed concerns about potential supply increases from Saudi Arabia.
Brent crude oil, against which Nigerian oil is priced, gained 5 cents to $95.43 per barrel at about 6:00 a.m. Nigerian time on Friday while the U.S. West Texas Intermediate crude (WTI) rose by 16 cents to $91.87 per barrel.
The market’s resilience became evident as it rebounded from a slight 1% dip in the previous session when profit-taking followed a surge in prices to 10-month highs.
China, the world’s largest oil importer, played a pivotal role in driving prices higher. Strong fuel demand coincided with China’s week-long Golden Week holiday, with increased international and domestic travel significantly boosting Chinese oil consumption.
Analysts at ANZ noted that this holiday season’s surge in travel was underpinned by the fact that the average daily flights booked were a fifth higher than during Golden Week in 2019, pre-dating the COVID-19 pandemic.
Also, improving macroeconomic data from China and the steady growth of its factory activity further supported the bullish sentiment.
The U.S. economy’s robust growth and indications of accelerated activity in the current quarter also bolstered expectations of sustained fuel demand.
Also, tight supplies in the U.S., evidenced by dwindling storage levels at Cushing, Oklahoma, provided additional support to oil prices. As rig counts fell, U.S. oil production was expected to slow down, potentially pushing the market into a deficit of more than 2 million barrels per day in the last quarter.
Investors are now eagerly awaiting the upcoming meeting of the Organization of the Petroleum Exporting Countries and allies (OPEC+), scheduled for October 4th.
The meeting will be a crucial indicator of whether Saudi Arabia will consider stepping up its supply in response to the nearly 30% surge in oil prices this quarter.
Analysts, however, caution that the market may be entering overbought territory, leading to possible hesitancy among participants and concerns that OPEC+ could ease production cuts earlier than planned if prices continue to rise.
The outcome of next week’s OPEC meeting will undoubtedly hold significant implications for the oil market’s future trajectory.
Oil Prices Soar to a Year High as Crude Reserves Plummet
Crude stocks at a pivotal storage hub in Cushing, Oklahoma, hit their lowest levels since July last year, sparking concerns about future supply stability.
Oil prices surged to their highest level in over a year during Asian trading hours, following a significant drop in crude stocks at a key storage hub.
Crude inventories in Cushing, Oklahoma, plummeted to a mere 22 million barrels in the fourth week of September, close to operational minimums, according to data from the U.S. Energy Information Administration (EIA).
This translates to 943,000 barrels compared to the prior week.
The U.S. West Texas Intermediate (WTI) rose to $95.03 per barrel during Asian trading hours, a peak not seen since August 2022 before settling at $94.61 per barrel.
Meanwhile, Brent crude oil, the international benchmark for Nigerian oil, rose by 1.05% to $97.56 per barrel.
Experts have attributed this rapid price escalation to the precarious situation in Cushing, with Bart Melek, Managing Director of TD Securities, stating, “Today’s price action seems to be Cushing driven, as it reaches a 22 million bbl low, the lowest level since July 2022.”
Melek expressed concerns about the challenges of getting crude oil into the market if inventories continue to dip below these critical levels.
Predicting the future trajectory of oil prices, Melek suggested that prices could remain at elevated levels for the remainder of the year, especially if the global oil cartel, OPEC+, continues to enforce supply restrictions.
He noted that the global oil market is facing a “pretty robust deficit” on top of an already significant shortfall for this quarter due to OPEC’s production cuts.
Saudi Arabia, a key player in OPEC+, has extended its voluntary crude oil production cut of 1 million barrels per day until the year’s end, bringing its crude output to nearly 9 million barrels per day.
Russia has also pledged to continue its 300,000 barrels per day export reduction until December.
However, Melek added that, “We do think that prices could keep up near these levels for quite some time. But I don’t think it’s too permanent. And we might have seen the end of this rally.”
Nigerian Pump Prices May Increase as Crude Oil Hits $93.55 Per Barrel
Amidst growing concerns over the surging price of crude oil on the international market, Nigerian citizens are bracing themselves for a possible increase in pump prices.
Crude oil, the lifeblood of Nigeria’s economy rose to $92.42 per barrel on Monday, casting a shadow of uncertainty over the already volatile fuel market.
This surge in crude oil prices comes in tandem with the persistent depreciation of the Naira in foreign exchange markets, where it traded at N980 to $1 on the parallel market. For many Nigerians, these simultaneous developments trigger memories of the recent fuel price hikes that followed the removal of fuel subsidies earlier this year.
In June, the government removed the subsidy, leading to a sharp 210% increase in the pump price from N175 per liter to N546.83 per liter. In a further blow to consumers, less than a month later, the price surged again, reaching N617 per liter.
However, since then, there have been no additional fuel increments, despite fluctuations in the Naira’s exchange rate. President Bola Ahmed Tinubu, along with key government officials and industry leaders, has reiterated their commitment to stabilizing petrol prices in the country.
According to Ajuri Ngelale, Special Adviser to the President on Media and Publicity, “The President affirms that there will be no increase in the price of petroleum motor spirit.”
Mele Kyari, Group Chief Executive of the Nigerian National Petroleum Corporation Limited (NNPC), echoed this sentiment, emphasizing that NNPC is the sole supplier of petrol nationwide and has not proposed any price hikes.
Industry experts like Chinedu Okonkwo, President of the Independent Marketers Association of Nigeria (IPMAN), have urged the government to expedite efforts in implementing Compressed Natural Gas (CNG) as a viable alternative to traditional fuels, providing a long-term solution to the country’s energy needs.
While the global crude oil price surge is a cause for concern, Nigerians are holding onto the government’s commitment to price stability and the potential for CNG to provide a sustainable energy alternative in the future.
In a market with unique dynamics, where NNPC remains the sole supplier and importer of fuel, the hope is that prices will remain stable for the benefit of all Nigerians.
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