Even as the Organization of Petroleum Exporting Countries (OPEC) modifies global demand potential, Nigeria’s ability to improve crude oil production despite a higher price regime is hampered by declining production capacity and technical problems.
Nigeria pumped 1.27 million barrels per day (mbd) this month, according to OPEC’s latest Monthly Oil Market Report (MOMR), down from 1.38mbpd in July. Oil has remained above $70 per barrel, with Nigeria unable to profit from the rally due to fuel subsidies and insufficient production capacity.
Nigerian crude production declined from an average of 1.36 million barrels per day in January to 1.23 million b/d in August, according to the Department of Petroleum Resources (DPR) 2021 crude oil and condensate production report.
According to the DPR report, Nigeria’s oil output has decreased due to problems at some oil terminals. Force majeure was announced on Forcados crude oil by Shell Petroleum Development Company of Nigeria in August.
Shell declared force majeure at its oil terminal due to the curtailment of production and suspension of export operations as a result of some sheen found on the water around the loading buoy – indicating a possible oil spill.
According to the DPR data, crude oil production at the Forcados terminal has been declining since June, with an average of 2 million barrels in August, down from 5.7 million barrels in July. Nigeria’s oil production has fallen below the OPEC+ deal’s production quota of 1.596 million barrels per day for the month under review.
READ ALSO: Oil Price Recovers After U.S. Asks OPEC+ To Increase Production
The country’s external reserves are under severe strain due to the continued drop in output volume. Inflation, subsidy payments, and weaker-than-expected economic performance continue to threaten the government’s aggressive revenue growth targets, as seen in the 2021 performance up to May, according to the 2022-2024 Medium Term Expenditure Framework Fiscal Strategy document (MTEF/FSP).
From January to May 2021, the government’s revenue was N1.8 trillion, a 33.3 per cent shortfall from the planned amount, compared to a spending profile of N4.86 trillion, or 92.7 per cent of the prorated budget. As a result, the deficit had already risen to N3 trillion by the end of May, more than half of the N5.6 trillion anticipated for the year.
If Nigeria can increase crude oil sales to the 1.8 million barrels per day target set for 2022, the country’s earnings may improve, inadvertently enhancing the exchange rate’s stability and ability to repay foreign loans.
Sarki Auwalu, the Director of the Department of Petroleum Resources (DPR), recently stated that optimizing Nigeria’s oil production procedures is critical to the country’s economic recovery.
OPEC forecasted oil demand at 100.83 million barrels per day in 2022, up 4.15 million barrels per day from 2021 and a significant increase over the 3.28 million barrels per day forecast it gave last month.
READ ALSO: Nigeria To Increase Oil Production To 4 Million Barrels Daily
The adjustment was predicated on a faster rate of demand recovery and a “steady” economic outlook in all regions, according to the cartel. Nigeria’s reluctance to scale up output is a source of concern, given the country’s continuing issues and fears about mounting subsidy claims.
“As vaccination rates rise, the Covid-19 pandemic is expected to be better managed and economic activities and mobility will firmly return to pre-Covid-19 levels,” the MOMR said, adding that additional support could come from further US fiscal stimulus.
The change was initially made at the OPEC+ joint technical committee (JTC), which monitors market developments and meets before the OPEC+ ministerial meeting on September 1.
In the short term, the epidemic will affect demand, according to OPEC’s MOMR. Although an upward revision to the third-quarter data has moved Opec’s 2021 oil demand projection up by 110,000 b/d from the previous report to 96.68mn b/d, it has cut down its fourth-quarter demand forecast to 99.70mn b/d.
On the supply side, OPEC stated non-Opec liquids supply growth this year is 170,000 b/d lower than predicted in last month’s report, due to outages in the Gulf of Mexico and lower-than-expected third-quarter North Sea production. Non-Opec supply is expected to rise 92,000 b/d this year, reaching 63.85 million b/d, according to Opec, with a growth prediction of 2.95 million b/d for 2022.
Leave a Reply
Recommended
Comments 2