Nigeria’s prospect brightens as oil shoots above $63 per barrel

Nigeria’s economic prospect brightened yesterday, as oil prices rose more than 3 percent, pushing Brent crude to a 2015 high, above $63 per barrel on increasing evidence that U.S. production is peaking.

Oil prices collapsed in the six months to January, pushing Brent down more than 60 percent, to almost $45 a barrel.

But the market has gradually recovered this year, as much lower prices have discouraged oil exploration and production, especially in the United States.

“People are realising that the U.S. production juggernaut is slowing, at least for now,” said Virendra Chauhan, oil analyst at London-based consultancy, Energy Aspects.

Oil revenues account for 70 percent of Nigeria’s Federal budget and up to 95 percent of export earnings.

U.S. crude oil production has begun to slow after several years of very sharp growth, industry data show.

The Organisation of the Petroleum Exporting Countries said in its monthly report on Thursday, that U.S. oil liquids output would increase by only 740,000 barrels per day (bpd) in 2015, down from growth of 1.64 million bpd last year.

Meanwhile, crude oil earnings by Nigeria and her Joint Venture (JV) partner dropped by 39.23 percent to $7.50 billion in the first quarter of 2015 from a Q4 2014 earnings of $12.49 billion.

According to the just released OPEC monthly oil market report, Nigeria’s production output based on secondary sources for January to March 2015 averaged 1.96 million barrels per day (mbpd), 1.896 mbpd and 1.861mpd respectively.

While Nigeria’s production output remains fairly stable, dwindling crude oil prices in the international market is responsible for the sharp drop in the country’s oil revenue.

Nigeria’s production output for March 2015 dropped by 38,600 bpd from 1.9mbd in February to 1.86mbd.   

According to the report, “total OPEC crude oil production averaged 30.79mbd in March, an increase of 81,000 mbd over the previous month. Crude oil output increased mostly from Saudi Arabia and Iraq, while Libya saw a return of about 165,000bd from shut-in wells in active oil fields. OPEC crude oil production, not including Iraq, stood at 27.16mbd in March, down by 49,000mbd over the previous month”.

Oil production from non-OPEC producers in Africa is expected to decline by 10,000bpd to average 2.41mbpd. This indicates a downward revision by 10,000bpd compared with the last monthly report.

The share of OPEC crude oil in total global production increased by 0.6 percent to 32.6 percent in March, compared to the February output.

The OPEC Reference Basket (ORB) retreated in March by $1.60 to $52.46 per barrel, as the market refocused on the oversupply situation as demand remained subdued.

OPEC in a November 27, 2014 meeting decided against cutting its production, despite misgivings from its non-Gulf members, after Saudi Oil Minister Ali al-Naimi said the group needed to defend market share against US shale oil and other competing sources.

The decision sent oil prices near a six-year low of $45.19 on January 13. Abdullah al-Badri, OPEC Secretary-General has started to express confidence that a bottoming out of prices and a recovery may be under way.

However, some OPEC members are feeling uneasy about the no-cut in output strategy. Bijan Zanganeh, Iran’s oil minister said the strategy of holding output steady is not working and the group’s members should discuss production levels before its next meeting in June.

“It seems (OPEC’s strategy of not cutting output) does not work well, because prices are coming down,” Zanganeh said during a visit to Beijing. “We haven’t witnessed stable situations on the market.”

“OPEC members, as a unit, need to re-evaluate their strategies,” Samir Kamal, Libya’s OPEC governor and head of planning at the North African country’s oil ministry said.

FRANK UZUEGBUNAM with agency reports