By Kunle Aderinokun
The International Energy Agency has said improved crude oil output in Nigeria made up for the losses recorded by some OPEC member countries to steady production month-on-month at 32.16 mb/d in January.
In disclosing this in its Oil Market Report for February, IEA also noted that compliance with OPEC supply cuts reached an unprecedented high of 137 per cent in the review month.
“OPEC crude oil production in January was steady month-on-month (m-o-m) at 32.16 mb/d. Higher Nigerian output offset losses elsewhere. Compliance with supply cuts reached a new high of 137 per cent,” the report stated.
Nigeria’s crude oil output, which level stood at 1.819 mbpd in January this year had been on a steady rise from the beginning of 2017 to December of the same year, when it achieved 1.828 mbpd. The federal government had sometime last year decided to cap its oil production at a sustainable volume of 1.8 mbpd. The decision was approved in July by OPEC and non-OPEC producers led by Russia.
Besides, OPEC and non-OPEC members also agreed to cut production volumes by as much as 1.8 million barrels per day (mbd) with OPEC members contributing 1.2mbd of that while the balance would be provided by non-OPEC members. The agreement was thus rolled over at their November 30, 2017 meeting till the end of this year.
The two sets of members had, at their last meeting, agreed to extend the agreement they reached in 2016 to cap the amount of oil they bring into the market in their efforts to shore up prices and stabilise the market.
Nevertheless, the IEA pointed out that, global oil supply in January edged lower to 97.7 mb/d, but was 1.5 mb/d above last year as rebounding US production underpinned non-OPEC output growth.
Noting that, non-OPEC output dropped by 175,000 b/d in January, to 58.6 mb/d, but was 1.3 mb/d higher than a year ago US crude output, up 1.3 mb/d year-on-year (y-o-y), the agency said it would “soon overtake Saudi Arabia and could catch Russia by the end of the year. Compliance with output cuts by non-OPEC countries was 85 per cent.”
The IEA stated in the OMR that, generally, the global oil demand growth for 2018 had been increased slightly to 1.4 mb/d, partly due to an optimistic GDP forecast from the IMF. This, it pointed out, was down from last year’s gain of 1.6 mb/d, as higher oil prices, shifting Chinese demand patterns and fuel switching in non OECD countries slows growth.
According to the agency, “Our demand growth estimate for 2017 remains strong at 1.6 mb/d, reinforced by November data for the US. For 2018, the more positive global economic picture published by the International Monetary Fund is a key factor in raising our growth outlook to 1.4 mb/d. It was thought that the significant increase in the dollar price of crude oil since the middle of 2017 would dampen growth, and this might be the case to some extent, but the impact of higher prices has been partly offset in some countries by currency appreciations.”
Specifically, The IEA noted that, “In 2018, fast-rising production in non-OPEC countries, led by the US, is likely to grow by more than demand. For now, the upward momentum that drove the price of Brent crude oil to $70/bbl has stalled; partly due to investors taking profits, but also as part of the corrections we have seen recently in many markets. Most importantly, the underlying oil market fundamentals in the early part of 2018 look less supportive for prices.”
Also, according to the February OMR, OECD commercial stocks fell in December by 55.6 mb, the steepest drop since February 2011, to reach 2851 mb. “Stocks drew by 154 mb (420 kb/d) during 2017 and ended the year 52 mb above the five-year average. In 4Q17, stocks fell sharply by 1.3 mb/d across the OECD.”
The IEA noted that, “After reaching an all-time high in 4Q17, global refining throughput is expected to slow by 0.4 mb/d in 1Q18 to 81.1 mb/d due to seasonal maintenance, primarily in the US and Middle East.”
“A strong rebound is expected in April-May as runs ramp up to meet increased seasonal demand and to replenish product stocks,” it added.