Reuters report on Tuesday 21st September 2021, stated that the OPEC group increased production in August but supplies may be insufficient to meet the world’s expanding oil demand. Despite the pandemic, global oil demand has recently risen to near-record levels as global activity picks up. In response, OPEC decided to increase oil production by 400,000 barrels per day (bpd) every month beginning in August. However, not all producers have heeded the request for additional barrels. Nigeria is discussing with the OPEC, for an increase in its oil production quota to about 2.2 million barrels per day.
According to the Minister of state petroleum resources, Timipre Sylva, “What we’re getting right now is 1.74 million barrels per day but we think we can do about 2.2 million barrels per day. He said this to the media on the sidelines of the Gastech conference in Dubai on Tuesday, 21st September 2021, adding that Nigeria can achieve that production level in six months. Nigeria was currently producing below its 1.74 million bpd quota due to technical challenges, Timipre Sylva also said Nigeria is expected to hit that output target in the next month or two.
In other news the Group Managing Director, of the Nigerian National Petroleum Corporation, NNPC Mele Kyari, projected that the supply crisis affecting the natural gas market may push oil prices up by $10 a barrel. Kyari said this on Wednesday 22nd of September in an interview with Bloomberg Television, he explained that the crude oil price may rise by $10 per barrel within the next three to six months. This increase in crude oil price is due to the fact that the gas supply crisis will make energy consumers to shift from gas to other fuels. Again, he mentioned that Nigeria is now having difficulties maintaining liquefied natural gas exports, and that there will be “slippages” with Nigerian LNG cargoes possibly this year and also in 2022 due to shortages at local gas sources. “We need to act quickly,” he added, as supply difficulties would be overcome by the middle of 2022.” Much of the difficulty with global supplies, he said, stems from the fact that fossil fuel projects have stopped as campaigners and investors press firms to speed up the transition to greener energy.
On Monday the 20th of September 2021, oil prices rose for a fifth straight day with Brent heading for $80 amid supply concerns as parts of the world sees demand pick up with the easing of pandemic conditions. Brent crude was up $1.14 or 1.5 per cent at $79.23 a barrel having risen a third consecutive week through Friday. U.S. Oil added $1.11 or 1.5 per cent to $75.09, its highest since July, after rising for a fifth straight week last week. Members of the Organization of Petroleum Exporting Countries and its Allies, known as OPEC+, have struggled to increase output as a result of under-investment or maintenance delays caused by the pandemic.
The several developments highlighted will impact on several fronts, which includes the oil and gas industry. The request from FG to OPEC+ is hinged on the basis that the government believes it has acquired the capacity to increase crude oil production. The NNPC projecting a rise of $10 per barrel in the global market serves as an added incentive for the request by the FG.
However, the rise of crude oil prices by $5 in the global market proves that even though the NNPC had forecasted more in terms of price increase, the oil and gas industry is experiencing a rebound, with the easing of the covid-19 pandemic. This however will create a change of price of AGO/PMS/DPK (Petroleum products) as the international prices will reflect on the mainstream market. However, with the FG still in the business of paying subsidy, the retail prices are likely to reflect the same while subsidy payment increases.
Source: Oriental news, Vanguard, Reuters.
