Nigeria’s Production Faces Setbacks As Oil Price Tumbles To $68
The international oil benchmark, Brent crude, extended its losses on Monday, falling below the $70 per barrel mark to its lowest level since May.
The further decline in the price of Brent followed the imposition of more travel restrictions by the world’s top crude importer, China, to fight what it sees as the worst outbreak since the original coronavirus outbreak in Wuhan.
A stronger US dollar also depressed oil prices as it makes crude more expensive for holders of currencies other than the greenback.
Brent, against which Nigeria’s crude oil is priced, fell by $1.72 to $68.98 per barrel as of 7:20pm Nigerian time on Monday, compared to $77.72 per barrel at which it closed on July 30.
Nigeria oil output remained hampered by operational and technical problems in July, S&P Global Platts quoted sources close to the matter as saying on Monday.
Three of the country’s crude oil grades, namely Bonny Light, Escravos and Forcados, all faced production issues last month while output for other key grades such as Qua Iboe, Brass River, Agbami, Akpo and Egina were said to have also remained low.
Nigerian crude and condensate output stayed stable at 1.64 million barrels per day in July, according to data from the Department of Petroleum Resources.
In June, crude production had fallen to a six-month low of 1.639 million bpd from 1.659 million bpd in May.
Pipelines feeding into Bonny Light and Forcados and other grades have faced persistent sabotage in the past few months, resulting in lower production, sources added.
July crude production inched up to 1.32 million bpd from 1.31 million bpd in June while condensate output fell to 316,237 bpd from 326,012 bpd, DPR data showed.
Nigeria’s crude oil production cap under the OPEC+ deal was 1.579 million bpd for July.
S&P Global Platts Analytics expects Nigerian crude supply to remain below its OPEC production quotas in the coming months due to ongoing field and pipeline issues with a downside risk to 2022 forecast if operational setbacks continue.
It said in a recent note, “We forecast [crude] supply at 1.5 million bpd in July-September. Supply reaches 1.8 million bpd by end-2021. Growth is threatened by fiscal stress, which may pressure amnesty payments to former militants.
“The last time the government curtailed amnesty payments, disruptions surpassed 600,000 bpd by mid-2016. Militant threats are also rising.”
Growing threats by militants to renew attacks on oil infrastructure in the restive Niger Delta also pose a huge concern for Africa’s largest oil producer.
Output has fallen in 2021 as key fields, especially those in the Niger Delta like Bonny, Brass River, Escravos, Forcados and Qua Iboe, are pumping well below full capacity due to technical problems or maintenance.
Nigeria has the capacity to produce between 2.2 million-2.3 million bpd of crude and condensate, but production has averaged only around 1.62 million bpd for the first months of 2021, according to S&P Global Platts estimates.
Production has fallen also due to Nigeria’s obligation under OPEC+ caps.
