Nigeria is facing a hard time finding buyers for its crude as 20 cargoes of June loading offered at slightly higher prices struggle to find buyers because customers in Europe sought cheaper barrels in the Mediterranean and from Russia, according to crude oil loading schedule seen by Reuters.
This situation is worsened by the force majeure on the Amenam stream and Bonny Light streams, which has continued to cause loading delays. This could significantly impact implementation of the budget and government programmes for the year.
The Amenam-Kpono field, operated by Total sits astride offshore blocks OML 99 and OML 70, about 30km off the eastern part of the Niger Delta while Bonny Light is a light-sweet crude benchmark crude for all West African crude production, the field is operated by Shell in Nigeria.
In the past, large orders from India offsets market decline from Europe but even Nigeria’s major buyer India was heard not to have significantly stepped up purchases despite having been Iran’s number two customer, Reuters said.
Oil market analysts now consider Nigeria the wild card in a market where disruptions to production from Venezuela and Iran has led the Organisation of Petroleum Exporting Countries (OPEC) to dig into spare capacity. US sanctions on Iran and Venezuela has cut global production by 1.85 million bpd from 2018 peaks according to Reuters estimates but Nigeria cannot fill the capacity.
Nigeria’s inability to strengthen its foothold in the global oil market is already having a telling effect on the local economy. According to the latest quarterly review of Nigeria Extractive Industries Transparency Initiative (NEITI), Federal Account Allocation Committee (FAAC) disbursements between January and March 2019 dropped to $1.929 trillion as against N1.938 trillion disbursed for the same period in 2018.
“Oil prices experienced a downward spiral from November 2018. Oil prices were above $80 per barrel in October 2018 but by December 2018 they had dropped to $57 per barrel. Average oil price for the first quarter of 2019 was $63.17 per barrel. Average oil price for year 2018 was $71.06 per barrel. Thus, oil prices have been considerably lower in the first three months of 2019 than they were in 2018”, NEITI said in its review.
NEITI in its report said the combined net disbursements from the Federation Allocation Account Committee (FAAC) to the 36 states and the Federal Capital Territory, Abuja, in 2017 and 2018, can hardly fund the 2019 budgets of 35 states.
This raises concern the market situation could hurt the Federal Government’s ability of implementing the 2019 budget. In the proposed 2019 budget, the federal government projects about N3.73 trillion as oil revenues to be derived from assumptions that oil prices will sell at an average price of $60 per barrel and Nigeria’s production will reach 2.3 million barrels per day.
However OPEC puts Nigeria’s production at about 1.7million barrels per day and even when condensation is added, production hovers around 1.9 million barrels per day.