OPEC: Nigeria’s Production Underperformance Hits 2.4m Barrels in December

0

•Sees stable market despite Omicron

•Oil price nears $90 per barrel

Emmanuel Addeh

With a daily underperformance figure of 78,000 barrels per day in December, Nigeria lost as much as 2.418 million barrels of crude in the last month of 2021, data released by the Organisation of Petroleum Exporting Countries (OPEC) showed yesterday.

However, Brent oil, Nigeria’s benchmark, rose further yesterday to close at $88 a barrel, having earlier hit $88.13, the highest since October 2014.

The month of December, according to the OPEC report, also saw Nigeria slump lower than other previous production performances, compared to for instance, October, in which 1.228 barrels were pumped per day, and November during which 1.275 million barrels were produced per day.

Given the average price of about $85 per barrel for the month, the inability to pump more oil may have cost the country approximately $205.5 million in the entire month.

The data, according to OPEC, which uses both primary and secondary sources to obtain information on production levels, was received from direct communication with Nigeria.

Among members of the cartel, the OPEC Monthly Oil Market Report (MOMR) for January showed, only crisis-torn Libya, lost more oil than Nigeria, with a production deficit of roughly 119, 000 barrels per day.

For proper context, Nigeria’s quota for February remained at 1.701 barrels per day, but the country’s effort to produce more in the last few months had not yielded any fruits.

While the target was to produce about 1.86 million barrels daily by the Nigerian National Petroleum Company (NNPC) Limited, poor upstream infrastructure, long term waning investment and the impact of the OPEC-induced shutdowns last year, have combined to hobble the number of barrels pumped by Nigeria.

Promises by the Minister of State, Mr. Timipre Sylva and the NNPC Group Managing Director, Mallam Mele Kyari, that the country would hit between 1.7 million barrels per day and 1.8 million barrels per day by the end of 2021 remained largely unrealised.

Nigeria had also been losing the desperately needed foreign exchange to its intractable payments for petrol subsidy, which have increased to over N100 per litre in recent months.

On the Nigerian economy, OPEC stated that although the country recorded a surplus of $3.6 billion, consumer prices have continued to pose a serious challenge.

“According to recently released statistics from the Central Bank of Nigeria (CBN), the country’s current account registered its highest surplus since early 2018, amid a strong trade position.

“In 3Q21, the current account posted a surplus of $3.6 billion compared with $348 million in 2Q21 and a shortfall of $3.6 billion in 3Q20.

“In 3Q21, exports exceeded imports by about $1.8 billion, recording the largest excess since late 2019. Additionally, improving oil prices continued to support the economic recovery, coupled with easing of the inflation rate, which marginally fell for the second month in a row to 15.4 per cent from 15.9 per cent, marking the lowest rate since November 2020, largely due to sustained moderation in food prices.

“However, on a monthly basis, consumer prices increased by 1.08 per cent, following a 0.98 per cent increase the previous month,” it stated.

On a global level, OPEC stuck to its forecast for robust growth in world oil demand in 2022 despite the Omicron coronavirus variant and expected interest rate hikes, predicting the oil market would remain well supported through the year.

Tight supply has given impetus to the current oil rally, and OPEC’s report also showed the group undershot a pledged oil-output rise in December.

The producers’ group said it expects world oil demand in 2022 to rise by 4.15 million barrels per day (bpd), unchanged from last month while oil consumption will surpass the 100 million bpd mark in the third quarter, also in line with last month’s forecast.

It added: “While the new Omicron variant may have an impact in the first half of 2022, which is dependent on any further lockdown measures and rising hospitalisation levels impacting the workforce, projections for economic growth remain robust.”

According to the cartel: “The oil market is expected to remain well-supported throughout 2022.”

Although the report also showed higher output from OPEC as the group and allies, known as OPEC+, gradually unwind record output cuts put in place last year, still the expected surplus this quarter has remained elusive.

OPEC+ has aimed to raise output by 400,000 bpd a month, with about 253,000 bpd of that due to come from the 10 OPEC members covered by the deal, but production has increased by less than that as some producers struggle to pump more.

The report showed OPEC output in December rose by 170,000 bpd to 27.88 million bpd, undershooting the rise OPEC was expecting.

In the same vein, OPEC raised its forecast for growth in 2022 production of United States shale, to 670,000 bpd from 600,000 bpd, with the growth forecast for overall non-OPEC supply in 2022 left unchanged.