The Organisation of Petroleum Exporting Countries (OPEC) has confirmed Nigeria’s continuing dismal oil production performance, pegging it at 1.18 million barrels per day in August, about 560,000 bpd less than the expected daily output.
The international oil cartel, in its Monthly Oil Market Report (MOMR) released on Tuesday, indicated that despite the country’s 100,000 bpd output growth, based on direct communication, month-on-month, it still fell short of the 1.74 million bpd quota allocated to the country.
The report’s publication is coming on the heels of efforts to ramp up oil production in the country. The Group Chief Executive Officer (GCOE) of the Nigerian National Petroleum Company Limited (NNPCL), Mr. Mele Kyari, has held widespread consultations with oil majors and partners, THISDAY learnt on Tuesday.
The GCEO has been asking the oil majors and partners what needs to be done to ramp up oil production in the short term, enable the country to meet its OPEC quota as well as produce enough condensate.
In addition, it was learnt that the new mantra to NNPC staff is “production, production, production, as a way of raising the required foreign exchange (FX) needed to stabilise the currency, which in turn is needed to stabilise fuel prices,” a reliable source at the NNPC who pleaded to remain anonymous disclosed.
At about 5.30 pm Tuesday, crude oil continued its upward swing as Brent Crude, Nigeria’s benchmark, was selling for $92.18 per barrel, hitting a fresh 2023 high, while the United States’ West Texas Intermediate (WTI) sold at $89.05 for a barrel of the commodity.
But despite the rising international crude oil prices, Nigeria has been unable to take full advantage to boost its much-needed FX needs and had recently said it was borrowing $3 billion from the AfreximBank.
The managers of the sector in the country have blamed high-level oil theft, pipeline vandalism and waning investment for the persistent underperformance, even though billions of naira get paid to local security groups monthly to protect the assets.
But on the overall state of the economy, the OPEC report stated that the economic performance of Nigeria in the non-oil sector showed a significant rebound, with noticeable increases in services, manufacturing, and agricultural output during 2Q,23.
However, it noted that high inflation continues to burden the economy, with the data for July showing ongoing acceleration, with an annual rate of 24.1 per cent y-o-y, following 22.8 per cent y-o-y in June and 22.4 per cent in May.
It recalled that food inflation had continued rising, reaching 27 per cent y-o-y in July, after 25.3 per cent y-o-y in June, and 24.8 per cent y-o-y in May.
Meanwhile, OPEC has stuck to its forecasts for robust growth in global oil demand in 2023 and 2024, citing signs that major economies were faring better than expected, despite headwinds such as high interest rates and elevated inflation.
It stated that world oil demand will rise by 2.25 million bpd in 2024, compared with growth of 2.44 million bpd in 2023, unchanged from last month’s report.
With a lifting of pandemic lockdowns in China, which has helped oil demand rise in 2023, OPEC has maintained a relatively upbeat view on 2024, seeing stronger demand growth than other forecasters such as the International Energy Agency (IEA).
“The ongoing global economic growth is forecast to drive oil demand, especially given the recovery in tourism, air travel and steady driving mobility,” OPEC said in the report. “Pre-COVID-19 levels of total global oil demand will be surpassed in 2023,” it added.
Oil demand collapsed in 2020, prompting some predictions of an early peak in world oil use. OPEC has been consistently saying it would recover and said in the report demand would average 102.1 million bpd in 2023, above the pre-pandemic rate during 2019.
OPEC and its allies, known as OPEC+, began limiting supplies in 2022 to bolster the market. Global benchmark Brent crude breached $90 a barrel last week for the first time in 2023 after Saudi Arabia and Russia extended voluntary cuts until the end of the year.
The IEA, which currently has a much lower view than OPEC of 2024 demand growth, will issue its latest outlook on Wednesday.
OPEC held its forecast for world economic growth this year at 2.7 per cent and kept next year’s figure at 2.6 per cent, citing a resilient first half and a steady global growth trend that had continued into the third quarter.
“Emerging Asia, particularly India, Brazil and Russia, could further surprise to the upside,” OPEC said.
“Moreover, if the US continues to keep its current momentum, growth could turn out to be higher than expected,” it noted.
The OPEC report also showed oil production rose in August driven by a recovery in Iran’s production despite US sanctions remaining in place on Tehran and Saudi Arabia’s voluntary cuts, as well as a marginal increase in Nigeria.
OPEC output rose by 113,000 bpd in August to 27.45 million bpd, the report said, even as a Reuters survey earlier found production had increased last month largely because of Iran. Iran is exempt from OPEC and OPEC+ production cuts because of the sanctions, Reuters said.
Emmanuel Addeh in Abuja