Emmanuel Addeh in Abuja
The Organisation of Petroleum Exporting Countries (OPEC) made only part of its planned production increase last month, with supplies hampered by disruptions in two of the group’s African members.
Specifically, OPEC added just 90,000 barrels a day in December, as a boost by Saudi Arabia was offset by losses in Libya and Nigeria, according to a Bloomberg survey, quoting secondary sources.
THISDAY had reported that Nigeria’s aspiration to raise crude oil production had been hobbled by ageing upstream infrastructure, its inability to restart assets shut down last year in the peak of the Covid-19 pandemic, vandalism and outright sabotage.
The OPEC+ coalition led by Saudi Arabia and Russia has been restoring production halted during the pandemic, and on Tuesday agreed to press on with further increases at a rate of 400,000 barrels a day.
But the process has been hindered as some members struggle with investment constraints and internal instability.
The coalition’s travails are helping to support oil prices even as global markets tip back oversupply, with Brent crude futures trading over $81 a barrel yesterday.
Libya’s production is in turmoil again after the country enjoyed a year of recovery and stabilisation. Output began to falter after militias shut the country’s biggest oil field, Sharara, ending the month down by 70,000 barrels a day at 1.06 million.
With the outage dragging on and compounded by damage to a pipeline connecting the largest export terminal — production is sinking to just 700,000 daily barrels.
In Nigeria, Royal Dutch Shell Plc had warned of difficulties with shipments of crude oil from its Forcados terminal, one of the country’s largest, during the last 10 days of the month.
The Bonny terminal, also operated by Shell has also had trouble loading cargoes, with the country’s output down 110,000 barrels per day to 1.42 million last month.
Ten of OPEC’s 13 members were permitted to add roughly 250,000 barrels a day last month under the terms of the group’s accord with the wider coalition, but their combined hike amounted to only 150,000 barrels.
While Angola managed a modest recovery last month, its output is down almost three times the amount required by the agreement.
The figures were based on ship-tracking data, information from officials and estimates from consultants, including Rystad Energy AS and JBC Energy GmbH, according to Bloomberg.
Constraints are hitting other countries in the wider coalition as Russia failed to boost oil output last month despite a generous ramp-up in its OPEC+ quota, indicating the country has deployed all of its current available production capacity.
Meanwhile, oil prices rose yesterday, extending gains even after OPEC+ producers stuck to an agreed output target rise for February and United States fuel inventories surged due to a sliding demand as COVID-19 cases spiked due to the Omicron variant.
Brent crude futures rose $1.27, or 1.6 per cent, to $81.26 a barrel as of yesterday afternoon, while the US West Texas Intermediate (WTI) crude futures rose $1.30, or 1.7 per cent, to $78.29.
Also, US crude stocks dropped by 2.1 million barrels, owing in part to tax incentives for producers to reduce inventories before year-end.
However, gasoline inventories jumped by more than 10 million barrels, and stocks of distillates rose by 4.4 million barrels.
The US reported nearly 1 million new coronavirus infections on Monday, the highest daily tally of any country in the world and nearly double the previous peak set a week earlier.
Overall product supplied, a proxy for demand, fell sharply, though the last four weeks has seen stronger demand than the same period two years ago before the pandemic’s onset.
Still OPEC+ will probably struggle to reach its target, as members including Nigeria, Angola and Libya face difficulties ramping up production, Barclays analysts said in a note.
“OPEC+ has adopted the path of least (political) resistance, as it continues to stay the course on increasing output targets, but actual incremental supplies are likely to be much smaller, similar to the demand effect from Omicron.”
The bank expects Brent oil prices to average $80 a barrel in 2022.
Earlier, OPEC+ signalled confidence in oil demand through the Omicron wave and reiterated its view that the variant’s impact on fuel consumption would likely be “mild and short-lived.”
