Nigeria’s oil production increases by 11,000 bpd to 1.73m bpd in March

Nigeria’s oil production increased in March to 1.73 million barrels per day (bpd) despite efforts by Organisation of Petroleum Exporting Countries (OPEC) to hold back output as part of measures to rein in global oversupply and bolster crude prices, latest report from OPEC reveals.
According to independent sources, the 14-member OPEC said Nigeria’s crude oil production increased by 11,000 bpd to 1.73 million bpd in March 2019, from 1.72 million bpd recorded in February.

Since 2018 and first quarter 2019, Nigeria’s oil production has hovered around 1.7 million bpd compared to 1.6 million bpd in 2016.

Conversely, OPEC’s output fell by 534,000 bpd in March to 30.02 million bpd thanks to Saudi Arabia’s and Iraq’s willingness to aggressively cut production and a further drop in Venezuela’s sanction-hit supplies, according to independent sources cited by the group in its monthly report. This is the lowest since February 2015 when the group pumped 29.97 million bpd.

Saudi Arabia, the world biggest oil exporter, took another 324,000 bpd off the market in March, bringing output to just less than 9.8 million bpd and delivering on Energy Minister Khalid al-Falih’s vow to pump well below 10 million bpd. Iraq’s output declined by 126,000 bpd to 4.5 million bpd, while Venezuela’s output plunged to just 732,000 bpd, recording a decline of 289,000 bpd compared to February.

Venezuela had been hit by the Trump administration’s sanctions on state oil company PDVSA. According to US government statistics, the United States imported zero barrels of crude from Venezuela during the final three weeks of March, which was a sharp decline from weekly imports of around 600,000 barrels per day before the sanctions were announced in late January.

This year alone, supply from the group has fallen by more than 1.5 million bpd, which is one of the major reasons why Brent crude oil has recovered to above $70 a barrel for the first time this year, with the market now facing a supply deficit despite growing output from the US shale industry.

“Any fresh signs of world growth cooling or global supply outpacing demand may end up dragging prices back below the $70 per barrel level,” Lukman Otunuga, FXTM Research analyst, told BusinessDay.

Rising oil price is good news for Nigeria in the short term. More than any other country, Africa’s biggest oil producing economy needs the oil price to rise and, in the worst case, remain steady at any price above the $60 benchmark of the 2019 budget.

To achieve this, the country needs to avoid disruptions in crude production and also hope that the alliance under OPEC achieves its objective, even though many are yet to comply with the output cut, including Nigeria, analysts say.

“I will not expect Nigeria to start tweaking with the budget at higher oil prices than what they already have. In fact, Nigeria should take advantage of such peak oil prices and save it for the rainy days,” said Wunmi Iladare, a professor of Petroleum Economics and Policy Research at the Centre for Petroleum Energy Economics and Law, University of Ibadan.

Another driver for higher oil prices has been the bullish bets made by hedge funds and other financial players. After going bearish on oil last year, these trend-following traders have gone long on crude in recent months. Those speculative positions can exaggerate price swings.
In March, OPEC said the performance of product markets typically follows seasonal patterns, with refining margins recovering during the driving season in the Northern Hemisphere.
“Looking ahead, product markets are expected to come under pressure as refineries resume operations following peak spring maintenance due Asian gasoline and diesel demand growth, and year-on-year change higher product availability,” OPEC said.

OPEC pumps about a third of the world’s crude, and the biggest of its 15 members is Saudi Arabia, one of America’s closest friends in the Middle East. While the group doesn’t target a specific oil price, it adds or removes supplies in the market and therefore can affect the cost of crude.

Since January 2017, the group and allies including Russia have cut production by about 1.2 million, helping to lift international prices and prop up weak oil prices.