Last week the price of crude gained 10 per cent after a combination of fears of Iran production outages, disruptions in Libya and a bullish stock draw in the US.
Brent, which is equivalent of Nigeria Bonny Light, rose more than 1 percent in early trading on Friday, and was not far off $80 per barrel.
It was only a week before that OPEC+ promised to add 1(one) million barrels per day (mb/d) to the market, but it already feels like a distant memory with the oil bulls back on the march.
Question, however, is, in all of these, where does Nigeria stand in terms of benefiting from the one million increase in crude oil production and price increase?.
Ideally, the country is supposed to be hitting at least 2. 4 or 2.5 million barrels per day without stress so that it can stand a better chance of benefitting from increase prices. The country’s average daily production on the i8th of May 2018 according to OPEC was 1.7million barrels per day and occasionally slightly above that. The budget is predicated on 2.3million per production and at $51 per barrel. But it is now very obvious that the target revenue based on budgetary projection may even not be met because of the familiar problems of the Niger Delta region.
The force majeure declared on shipments of Bonny Light crude oil still remains in force following the shutting down of Nembe Trunk pipeline, while exports at the Forcados shipping hub were running as normal. Exports of Bonny Light are expected to run at around 195,000 barrels per day next month, making it Nigeria’s third largest crude oil stream, behind Forcados and Qua Iboe, but the country is being denied the revenue coming from this terminal.
But forcados had had its own taste of vandalisation or shut- in. This happened shortly after communities around the pipeline protested there was reported rupture on the pipeline that lasted almost two weeks. This means there was a short fall of about 250,000 barrels per day.
The peace in the Niger Delta is fragile as the militants are merely watching how events are unfolding. They may strike again and make the whole region difficult for oil workers to operate, because they already sending warning signals to oil companies and the government claiming that the government has failed in almost of it promise.
Unless the government finds complete solution to the problems of the Niger Delta region, the country would continue to stand the risk of not benefitting from any positive development from the global crude oil price increase.
The recent one million barrel oil production increased by OPEC + Nigeria is not going benefits because she was not able meet her daily production quota even when there was a cap on production. This therefore is huge revenue lost to the country.
Saudi Arabia has increased its oil production this month by 700,000 bpd to 10.70 million bpd, very close to its highest-ever production of 10.72 million bpd from November 2016, a Reuters survey showed on Friday in a clear sign that OPEC’s largest producer is making up for supply drops elsewhere within the cartel.
Saudi Arabia’s previous production record of 10.72 million bpd was set in November 2016, just before the original OPEC and allies’ deal to curb production entered into force in January 2017