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Nigeria’s Rig Count Declines MoM, but Year-on-Year Shows Resilience Amidst Global Trends

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Nigeria’s rig count, a crucial metric indicating the level of activity in the upstream sector, experienced a month-on-month decline of 13.3 percent, falling from 15 in September 2023 to 13 in October 2023.

This downturn reflects a period of limited investment and activity, as highlighted in the November 2023 Monthly Oil Market Report (MOMR) released by the Organization of Petroleum Exporting Countries (OPEC).

However, on a year-on-year basis, the report revealed a noteworthy increase of 62.5 percent in Nigeria’s rig count, rising from eight in October 2022 to 13 in October 2023.

This resilience suggests a positive trajectory in the country’s oil and gas sector despite short-term fluctuations.

Nigeria’s oil output showed a marginal month-on-month increase of 1.2 percent, reaching 1.416 million barrels per day (bpd) in October 2023, compared to 1.399 million bpd in September 2023.

Data from official sources indicated a similar marginal rise of 0.29 percent, with oil output reaching 1.351 million bpd.

Commenting on these developments, Engr. Gbenga Komolafe, the Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), attributed the increased activities to the positive impact of the Petroleum Industry Act (PIA).

The PIA, a comprehensive legislation aimed at boosting investment in the oil and gas industry, has provided institutional governance, efficient administration, and attractive fiscal regimes, creating a conducive atmosphere for investment and operations.

Komolafe further disclosed that the NUPRC is collaborating with TGS-Petrodata, a globally recognized organization, to provide enhanced data clarity for investors, reinforcing Nigeria’s commitment to transparency and attractiveness in the energy sector.

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Crude Oil

Libyan Oil Field and Gas Link to Italy Reopen After Protesters Withdraw

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Following a brief interruption, operations at an oil field in western Libya and a natural gas link to Italy have resumed as protesters retreated from the facilities.

The demonstrators withdrew after receiving assurances from the government regarding their demands.

The Wafa oil field, which typically produces between 40,000 to 45,000 barrels per day, recommenced shipments after a temporary halt prompted by guards’ demands for improved compensation.

Similarly, the gas pipeline connection to Italy is once again operational, according to sources familiar with the situation who preferred anonymity due to the sensitivity of the matter.

Protests disrupting energy infrastructure and output are not uncommon in Libya.

In recent times, demonstrations have frequently disrupted operations, with the significant Sharara oil field experiencing prolonged suspension last month due to similar protests, invoking a force majeure clause in contracts.

The resumption of activities marks a relief for both the Libyan energy sector and Italy, which heavily relies on the natural gas link for its energy needs.

However, the incidents underscore the ongoing challenges faced by Libya in maintaining stability within its vital energy infrastructure amidst socio-political unrest.

Efforts to address the grievances of protesters and ensure sustained operations remain pivotal for the country’s economic well-being and regional energy dynamics.

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Oil Prices Dip on Monday as Dollar Gains

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Oil prices experienced a downturn, extending losses from the previous session as the U.S. dollar surged against global counterparts to impact market sentiment.

Brent crude oil, against which Nigerian oil is priced, slipped by 0.2% to $81.48 a barrel while U.S. West Texas Intermediate crude (WTI) declined by 0.3% to $76.27 a barrel.

The upward trajectory of the dollar renders oil more costly for holders of other currencies, contributing to the decline in oil prices.

This downward trend follows a week of losses, with Brent declining approximately 2% and WTI falling over 3%.

Market participants attribute these fluctuations to concerns about inflation potentially delaying anticipated cuts to high U.S. interest rates. Such expectations have been suppressing global fuel demand growth.

Analysts observe a retreat in the risk-on sentiment, coinciding with heightened expectations of prolonged interest rates.

Tina Teng, an independent analyst based in Auckland, notes that the recent market rally led by Nvidia has stalled, as elevated rate expectations bolster the U.S. dollar, thereby pressuring commodity prices, including oil.

Despite geopolitical tensions such as the Israel-Hamas conflict and attacks on ships in the Red Sea, which could have traditionally boosted oil prices, the impact remains modest.

Moreover, investors are monitoring developments surrounding Russian oil supply following recent U.S. sanctions on Moscow’s leading tanker group.

Amidst these uncertainties, Qatar’s decision to increase liquefied natural gas production further adds to global energy supplies.

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Crude Oil Dips Slightly on Friday Amid Demand Concerns

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On Friday, global crude oil prices experienced a slight dip, primarily attributed to mounting concerns surrounding demand despite signs of a tightening market.

Brent crude prices edged lower, nearing $83 per barrel, following a recent uptick of 1.6% over two consecutive sessions.

Similarly, West Texas Intermediate (WTI) crude hovered around $78 per barrel. Despite the dip, market indicators suggest a relatively robust market, with US crude inventories expanding less than anticipated in the previous week.

The oil market finds itself amidst a complex dynamic, balancing optimistic signals such as reduced OPEC+ output and heightened tensions in the Middle East against persistent worries about Chinese demand, particularly as the nation grapples with economic challenges.

This delicate equilibrium has led oil futures to mirror the oscillations of broader stock markets, underscoring the interconnectedness of global economic factors.

Analysts, including Michael Tran from RBC Capital Markets LLC, highlight the recurring theme of robust oil demand juxtaposed with concerning Chinese macroeconomic data, contributing to market volatility.

Also, recent attacks on commercial shipping in the Red Sea by Houthi militants have added a risk premium to oil futures, reflecting geopolitical uncertainties beyond immediate demand-supply dynamics.

While US crude inventories saw a slight rise, they remain below seasonal averages, indicating some resilience in the market despite prevailing uncertainties.

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