A report released a few days ago by the Organization of Petroleum Exporting Countries (OPEC) has shown that Nigeria has lost its position as the biggest oil producing country in Africa to Libya.
According to the report, Nigeria’s oil production which was at about 1.25 million barrels per day in September reduced to about 1.23 million barrels per day in October this year while Libya oil production increased from 1.16 million barrels per day in September to 1.24 million barrels per day in October.
Recall that Libya had earlier overtaken Angola to become the second oil producing country in Africa.
Nigeria’s slack in crude oil production has been blamed on lack of investment in oil-producing facilities and the challenges of recurring militant attacks on key pipelines.
According to OPEC, “Crude oil output increased mainly in Saudi Arabia, Venezuela, the UAE [the United Arab Emirate], and Kuwait, while production in Nigeria, Gabon and Equatorial Guinea declined.”
“However, soft demand from Asian refiners for Atlantic Basin crude amid unfavourable west-to-east arbitrage capped the rise. Crude differentials of Bonny Light, Forcados, and Qua Iboe rose firmly on a monthly average in October by 70¢, $1.06, and 75¢, respectively, to stand at premiums of 10¢/b, 27¢/b, and 4¢/b,” the report added.
In its analysis, Capital Economics, a London-based economic research firm, stated that whereas the factors affecting reduction in countries’ oil production might be resolved, it may not have much impact on the general trend of undersupply in the oil market.
According to Capital Economics, “Angola and Nigeria were largely responsible for this undershoot. Operational issues brought about by a lack of investment in oil-producing facilities continue to plague output in both countries, while Nigeria is also grappling with recurring militant attacks on key pipelines.
“This will do little to alleviate the signs of undersupply in the oil market. For example, the price spreads between front-month futures and longer-dated futures are now as negative as any time in recent years, which normally indicates a lack of near-term supply.”
It noted that “Despite persistently undershooting its target, we doubt OPEC will make any major changes to its output policy at its next meeting on December 2. Admittedly, external pressure on the group has continued to grow, with the US now reportedly considering a release of oil stocks from its strategic reserve.”