Crude oil prices rose to a 4-year high in October 2018 before dipping more than $30 in the following months. Oversupply and demand worries were seen as the cause of the volatility. But there were other market dynamics at play; President Donald Trump’s tweets demanding lower oil prices and US shale producers pumping out unprecedented volumes of crude which threatened to undo all of OPEC and Russia’s years-long work.
The organization of Petroleum Exporting Countries (OPEC) members and 10 non-OPEC producers in December 2018 decided to cut oil production and help to re-balance an oil market that was becoming over-supplied. The implementation of that decision which took effect from January 2019 should lead to a gradual stabilization of prices and probably, a return to a lower-volatility environment.
But then, there are other variables; can US continue to exceed production expectations? Will the slowdown in the global economy devolves into something worse? How effective will US pressure on buyers of Iran crude be? What of the decision by Qatar to remove itself from OPEC and focus more on natural gas?
On the supply side, will we see a significant further decline in production from Venezuela? Can Libya manage to maintain production without more disruptions?
According to the International Energy Agency (IEA), the market may operate in 2019 without the very high volatility witnessed in 2018.
For Nigeria, its crude oil production rose to 2.09 million barrels a day in 2018 compared with 1.86 million bpd the year before, according to the Nigerian National Petroleum Corporation (NNPC).
“Nigeria’s crude oil daily production recorded an upward swing of about 2.09 million barrels in outgone 2018 compared with the 2017 average daily production of 1.86 million barrels,” the NNPC said in a statement. The country was producing 1.6 million bpd of oil and 0.4 million bpd of condensate. Nigeria has maintained “a line of consistent year-on-year improvement”, Maikanti Baru, Group Managing Director said. However, the coming on stream of the 200,000 b/d Egina oil field could take the country’s production output to a decade high of 2.3 million b/d.
However, uncertainties remain. The volatile campaign season ahead of upcoming elections and the stalled oil sector reform are key indices.
In the past few years, there has been apathy in investment in the sector as a result of the lack of progress of the industry legal and regulatory reform which President Buhari withheld its assent in August 2018. But in a twist, he promised recently he would assent to the Petroleum Industry Governance Bill (PIGB) as soon as the National Assembly presented it to him. Oil majors are all losing patience with the slow progress of reform.
On the political front, the upcoming elections give cause for concern which could result in pockets of violence, enough to disrupt operations. There are palpable fears that politicians may use militants in a way that could lead to some shut-ins and vandalization of pipelines and other oil installations especially in the southern part of the country where President Buhari’s popularity has waned.