The Organisation of Petroleum Exporting Countries (OPEC) has said that Nigeria’s crude oil production fell to a record low of 1.57 million barrels per day as at last December.
In its monthly oil market report published midweek, Nigeria’s oil output stood at 1.66 million bpd in November, based on direct communication. OPEC uses secondary sources to monitor its oil output, but also uses figures submitted by member countries.
The secondary sources said Nigerian’s crude production in December was in line with its quota of 1.77 million bpd. In a recent note, analysts at the Financial Derivatives Company Limited said Nigeria is more sensitive about production than price. “A lower oil output would affect the actualisation of budgeted revenue projections as oil revenue accounts for 31.35% of the total revenue projected,” they said.
OPEC and its partners, including Russia, agreed to cut output by a further 500,000 bpd from January through March 2020, on top of their previous cut of 1.2 million bpd. The international rating agency, S&P Global Platts, have said that starting this month, Nigeria’s quota drops to 1.75 million bpd under the OPEC+ coalition’s agreement to deepen its production cuts through March.
Recently, Mr. Mele Kyari, the Group Managing Director, Nigerian National Petroleum Corporation (NNPC) said Nigeria is shifting its upstream work towards natural gas liquids and natural gas, to better comply with its crude production quota under the OPEC+ agreement. “You can produce condensate which is not part of the OPEC commitments. We are focusing our production to more gas-based reservoirs so that we can continue to grow our production while maintaining balance in the market,” he was quoted as saying on the sidelines of the Atlantic Council Global Energy Forum in Abu Dhabi.
OPEC said in the report that a rise in oil demand growth this year would be offset by a sharper increase in non-OPEC supply. “Continued accommodative monetary policies, coupled with an improvement in financial markets, could provide further support to ongoing increases in non-OPEC supply,” the report said.
Furthermore, the report said that OPEC+ cuts remained essential in maintaining stability in the oil market. The pace of supply growth is expected to continue to outpace oil demand, further putting pressure on interest for OPEC crude, which means it may need to keep its cuts going to balance the oil market.
OPEC posits that demand for its crude would average 29.50 million bpd in 2020, which is 60,000 bpd above what it produced in December. However, demand for its crude from January to March this year, which is the duration of its current cuts, is predicted to average 29.19 million bpd. Demand for OPEC crude averaged 30.60 million bpd in 2019.
OPEC noted that the US crude output is “continuing to increase, despite the pullback in drilling, as companies are running through their inventories of drilled but uncompleted wells.”
The US crude oil production in 2020 is forecast to grow by 980,000 bpd to 13.18 million bpd. OPEC and its allies plan to meet March 5-6 in Vienna to review their production cut agreement and decide whether to extend them.
Chibisi Ohakah
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