Nigeria’s Crude Oil Production Volume Falls 60,000bpd in June
Federal Government (FG) swims in a flood of uncertainties as Nigeria’s crude oil production volume for June was 60,000 barrels per day below target, data from the United States (U.S) International Energy Agency report shows.
At an average price of $100 per barrel reported in the global market in June, the Federal Government’s revenue miss was about N75 billion at a N415 per dollar conservative exchange rate in the official window.
The decline in oil exports has negative impacts on government foreign receipts and potentially a downside to gross domestic product growth, according to analysts. Africa’s largest economy still depends heavily on foreign receipts from hydrocarbon-related exports but weak investment and oil theft have worsened fiscal slippage in recent times.
The report revealed that benchmark crude oil futures plunged by more than $20 per barrel litre in June as a worsening economic outlook fuelled a broad market sell-off.
The report noted that Brent was below $100 per barrel litre while West Texas Instrument –WTI- traded at around $96 per barrel litre. Price premiums for physical barrels widened on rising seasonal demand for both crude and products while supply remains constrained.
Recently, the finance ministry reported that Nigeria’s debt service costs outrun total income generated in the first four months of the fiscal year 2022 despite an oil boom. In its latest report, IEA data shows that Nigeria’s production volume was 1.17 million barrels per day in June, against the market supply expectation of 1.77 million barrels per day.
The recent crude production was however an upgrade from 1.11 million barrels produced per day in the month of May as the nation was rated high in terms of compliance. The organisation of petroleum exporting countries (OPEC) and its allies (OPEC+) supply inched upward marginally in the period.
In June, OPEC member countries’ supply printed at 28.74 million barrels per day, an increase when compared with 28.56 million barrels per day in May. The oil group and allies production volume inched upward to 48.60 million barrels per day in June, from 43.25 million per day in the previous month.
“Higher prices and a deteriorating economic environment have started to take their toll on oil demand, but strong power generation use and recovery in China are providing a partial offset. READ: Naira Falls as Dollar Volume Traded at Investors Window Slides
“Global oil demand growth has been marginally reduced to 1.7 million barrels per day in 2022, reaching 99.2 million barrels per day. A further 2.1 million barrel per day gain is expected in 2023, led by a strong growth trajectory in non-OECD countries”, according to IEA.
“Our forecast was revised slightly higher for oil supply for the remainder of the year due to Russia’s surprisingly strong performance”. In June, global output rose by 690 kb/d to 99.5 mb/d, as Russia defied sanctions and the US and Canada pumped more, according to IEA report.
IEA report stated that World’s oil supply is expected to grow by roughly 1.8 million barrels per day through December, rising short-term risks to oil supply in Kazakhstan, Libya and elsewhere have put the spotlight on spare capacity, which now is held primarily by Saudi Arabia and the UAE.
The report indicates that their combined buffer could fall to just 2.2 mb/d in August with the full phase out of record OPEC+ cuts. The OPEC+ group is due to meet on 3 August to chart strategy for September and possibly longer.
IEA posits that global oil inventories remain critically low, with recent builds concentrated in China, where refiners reduced runs due to weaker demand amid Covid lockdowns.
OECD industry stocks have recovered somewhat thanks to sizeable government stock releases, but remain nearly 300 mb below their five-year average, it said. As an EU embargo on Russian oil is set to come into full force at the end of the year, IEA said the oil market may tighten once again.
“With readily available spare capacity running low in both the upstream and downstream, it may be up to demand side measures to bring down consumption and fuel costs that pose a threat to stability, most notably in emerging markets.
“Without strong policy intervention on energy use, risks remain high that the world economy falls off-track for recovery”, the report said. #Nigeria’s Crude Oil Production Volume Falls 60,000bpd in June