Oil prices have held steady and rising thanks to high compliance rates among the OPEC+ cartel to drain supply glut and rebalance oil market with consequent rise in prices but Nigeria still lags on reforms to lure fresh investments.
At the March 18 meeting of Joint Ministerial Monitoring Committee (JMMC) of the Organization of Petroleum Exporting Countries, the Committee reviewed the monthly report prepared by its Joint Technical Committee (JTC). The review also included recent developments in the global oil market, as well as immediate prospects for the remainder of 2019.
“All participating countries present at the meeting, individually and collectively, assured the Committee that they will exceed their voluntary production adjustments over the coming months” OPEC said, on its website.
Analysts see oil price crossing the $74 per barrel mark in 2019 and have said OPEC cannot end supply cuts as long as the supply glut continues. The JMMC “Declaration of Cooperation” has played a critical role in supporting oil market stability since December 2016. There has been an overall conformity of almost 90 percent for the month of February 2019, which is up from 83 percent in the month of January.
Brent crude rose by $0.06 to $67.48 per barrel as at 1416 GMT on Wednesday. West Texas Intermediate fell by $0.13 to $59.16 per barrel, 1416 GMT.
“We are optimistic about Brent price and we think it will average $74 per barrel in 2019. For early 2020 we think it will hover around $83 per barrel” Bilal Khan, senior economist MENA and Pakistan at Standard Chartered Bank said in an interview with Bloomberg. “Demand may not be strong as it was last year, particularly for Germany.”
Nigeria’s energy industry is peculiar though. Delayed reforms in the sectors regulatory framework has made it difficult for investors to decide where to put money in the sector. What this means it that, Nigeria will play at the periphery of this best case scenario assumptions for the oil price.
“We have an upstream that is not operating optimally, midstream that is not functioning and a downstream that is dying, so we have to think of a way to ensure private sector can make investment in the sector,” Ademola Henry, team leader at Facility for Oil Sector Transformation (FOSTER II) had told BusinessDay in an earlier report.
Africa’s largest crude producer lost an opportunity to increase efficiency and accountability in the sector, in 2018 when President Muhammadu Buhari declined assent to the Petroleum Industry Governance Bill (PIGB).
President Buhari dissented from the bill mainly because of the proposal in the bill to have the Petroleum Regulatory Commission (PRC), the successor agency to the Department of Petroleum Resources (DPR), as the principal regulator of the oil and gas industry, retain 10 percent of the revenue generated by the commission for its own operations.
“We are stuck until the Petroleum Industry Governance Bill is passed. Our reserves have been capped because there are no new investments. There are no new investments because investors do not see clarity” said Ronke Onadeko, an expert in Nigeria oil and gas sector business development.
In consideration that market fundamentals are unlikely to materially change in the next two months, the JMMC adopted a recommendation to forego the full Ministerial Meeting in April and instead schedule a JMMC meeting in May ahead of the OPEC Conference meeting on 25 June, during which a decision will be taken on the production target for the second half of 2019.
STEPHEN ONYEKWELU
