Market News

Nigeria’s oil production remained stable in the last three months, albeit low, going by its rig count and production volume, as reported by the latest data from the Organisation of the Petroleum Exporting Countries (OPEC) yesterday.

Besides, the cartel has reduced its global demand growth forecast for this year to 3.1mn b/d, down by 300,000 b/d from its previous-month estimate, given “expectations of a resurgence of Covid-19 restrictions and ongoing political uncertainties” in the second half of 2022.

In its Monthly Oil Market Report (MOMR) the group now sees world oil demand at 100.03mn b/d in 2022. It sees demand growth at 2.7mn b/d in 2023, unchanged from its previous report.

According to OPEC, Nigeria’s production, based on secondary sources, went up marginally to 1.18 million barrels a day (mbpd) in July, from 1.17mbpd in June, just as its rig count remained unchanged at 11 for the two months.

Nigeria’s oil production crashed by about 14.94 million barrels in the second quarter of this year, an indication that the country’s oil earnings plunged by about N703.76bn, being the worth of the crude that was lost during the review period.

The Federal Government, as well as operators in the oil sector, has repeatedly decried the plunge in Nigeria’s oil production, attributing the decline to acts of vandalism by oil thieves.

Others include the non-restart of shut-in oil wells, ageing facilities, the inability of the national oil company and the many independent companies to replicate the capacity demonstrated by the exiting IOCs.

The foregoing challenges have rendered the government’s aspiration of achieving three million barrels per day oil production and 40 billion barrels reserves almost impossible, with the reserve stagnating between 36 and 37 billion barrels for years.

OPEC anticipates demand from Organisation for Economic Co-operation and Development (OECD) Americas will pick up the most this year, driven by US third- and fourth-quarter recoveries in appetite for gasoline and diesel.

“Gasoline demand is due for a rebound following a relative drop in retail prices that should support the summer driving season,” OPEC said.

It expects Chinese oil demand — especially the industrial sector’s call on distillates — will improve in the second half of 2022, following hurdles created by Covid-19 restrictions implemented earlier in the year.

The oil cartel is more optimistic on demand growth than the International Energy Agency (IEA), which earlier put its estimate for the year at 2.1mn b/d.

OPEC foresees a “gradual economic recovery” in the second half of the year, assuming no escalation of the war in Ukraine. It said the consequences of a “potential further decline in Russian fossil fuel exports to G7 economies for energy supplies, energy prices and, consequently, global economic growth, remain to be seen.”

The cartel revised down the call on its members’ crude by 300,000 b/d this year and in 2023, to 28.8mn b/d and 29.8mn b/d respectively.

On supply, OPEC lightly trimmed its forecast for non-Opec liquids growth in 2022, to 2.14mn b/d from 2.15mn b/d. It revised up its assumptions for Russian output by 250,000 b/d to 10.88mn b/d this year, observing “higher-than-expected production in the last two months.” It raised its Russian production estimate for 2023 by 90,000 b/d, to 10.43mn b/d.