Nigeria’s crude oil exports rose to 2.2 million barrels per day (bpd) in August, the highest this year, according to Bloomberg tanker-tracking data, showing that rising sabotage of oil infrastructure has not significantly marred production.
Another survey by oil markets analytics firm, S&P Global Platts, found that Nigeria which has often pumped more than its cap hit its highest production level since January 2015 of 1.98 million bpd. Production was 1.93 million in July.
Despite the NNPC reporting recording 77 percent increase in cases of oil pipeline vandalism in its network of pipeline infrastructure in its latest report, a spike in crude and condensate production in the past six months due to the start-up of the 205,000 b/d deepwater Egina field which came online December 29 has cancelled out losses incurred by sabotage.
“Some projects that were in development phase a few years back are coming on stream while other producers are ramping up production,” an energy analyst involved in one of these projects told BusinessDay
The heightened geopolitical tensions fuelled by US sanctions against Iran and Venezuela could be “helping to improve the overall appetite for production increment”, analysts say.
Nigeria has also brightened the chances of oil majors ramping production by its commitment to pay its arrears of joint crude oil production with the International Oil Companies, commonly called cash call.
Rising production would need to flow in the direction of higher prices to achieve the most value for Nigeria whose economy depends on oil income. Nigeria’s 2019 budget is premised on the production of N2.3 million barrels per day (bpd) and that oil prices will sell at the average price of $60 per barrel.
The oil sector posted a real growth rate of 5.15 percent as compared with the corresponding ones from a year earlier, says the Nigerian Bureau of Statistics.
The NBS data further said that the sector contributed 8.82 percent to total real GDP in the second quarter of 2019, up from levels recorded in the corresponding period of 2018 but down compared to the preceding quarter.
OPEC’s second biggest producer, Iraq, also saw a jump in production by 100,000 bpd recording output of 4.88 million bpd, according to S&P Global Platts report, figures that could further derail the cartel’s plan to stem fallen crude prices.
Saudi Arabia, the biggest producer in OPEC and co-chair of the agreement to curb supply along with Russia, pumped 9.77 million bpd in August, the survey found, as tanker-tracking data showed a rise in its crude exports and satellite imagery suggested a build in inventories. Yet, the kingdom remains 540,000 b/d under its agreed quota of 10.31 million b/d.
With August’s rise in output, OPEC’s overall compliance fell to 103 percent among the 11 members with output caps from 117 percent in July, according to Platts’ calculations. Reuters survey found that August output rose actually rose by 80,000 bpd 29.61 million bpd.
This is despite an agreement it had with members and a group of non-members to curb output into 2020 to raise prices and brighten demand outlook in the face of rising shale production in the US.
Analysts say rising production could make it difficult for OPEC to manage the perception that it can balance markets where demand is declining. It could also create internal problems for OPEC because Iraq is leveraging on sanctions against Iran’s production to grow output.
“Whenever Iranian production is under pressure and Iraqi production increases, keeping the peace within OPEC becomes incredibly difficult to do,” Dave Ernsberger, global head of commodities pricing at S&P Global Platts, told CNBC.
Oil prices have struggled to break much above the $60/b level in recent weeks, but the markets welcomed news of the appointment of Saudi Arabia’s new energy minister, Prince Abdulaziz bin Salman, who promised that the kingdom will remain a responsible producer. Brent price rose marginally to $61.87 and WTI $56.87.
ISAAC ANYAOGU
