Nigerian oil agency boss says country is pumping oil at record levels as prices soar to a seven month high over supply worries
Nigeria is pumping 1.67 million barrels of oil and condensates per day, compared with just under a million barrels some months ago, due to security improvements in the producing Niger-Delta region, the head of the state-oil firm NNPC said on Friday.
Mele Kyari, NNPC’s group chief executive, said President Bola Tinubu has “re-engineered the security approach. We’ve already seen very significant changes in our production environment.”
Africa’s top oil producer recorded an average daily oil output (NGOIL=ECI) of 1.22 million barrels per day (mbpd) in the second quarter of 2023, the National Bureau of Statistics said a week earlier.
Large-scale oil theft from pipelines and wells has hobbled the country’s output and crimped exports in recent years, damaging Nigeria’s finances and leaving Tinubu with one of his biggest challenges.
Tinubu, who has embarked on Nigeria’s boldest reforms in decades, scrapped a costly but popular subsidy on petrol that cost the country $10 billion last year. The central bank, under Tinubu, has also lifted foreign exchange trading restrictions.
Kyari said Nigeria would have been spending about 1 trillion naira ($1.3 billion) monthly on the subsidy “in today’s market conditions”, he said, adding that petrol consumption is down 30% to 46 million litres after the subsidy removal.
He added that foreign exchange demand for petrol imports has also declined.
“We simply don’t have those resources anymore. We’re not just saving money, we’re also facing realities around what we can afford,” Kyari said.
Nigeria’s oil sector is yet to contribute positively to the country’s economic growth, which slowed to 2.51%in the second quarter, due to years of underinvestment, crude-oil theft and pipeline vandalism.
In the second quarter, the dominant oil sector which accounts for the bulk of government revenue and 90% of foreign-exchange reserves, contracted 13.43%.
Oil prices rose on Friday to their highest in over half a year and snapped a two-week losing streak, buoyed by expectations of tightening supplies.
Saudi Arabia is widely expected to extend a voluntary 1 million barrel per day oil production cut into October, prolonging supply curbs engineered by the Organization of the Petroleum Exporting Countries (OPEC) and allies, known collectively as OPEC+, to support prices.
Russia, the world’s second-largest oil exporter, has already agreed with OPEC+ partners to cut oil exportsnext month, Deputy Prime Minister Alexander Novak said on Thursday.
Brent crude settled up $1.66, or 1.9%, at $88.49 a barrel. Earlier it gained to a session high of $88.75 a barrel, the highest since Jan. 27.
U.S. West Texas Intermediate crude (WTI) had risen $1.39, roughly 1.7%, to $85.02. It rose earlier to $85.81, the highest since Nov. 16.
A keenly watched U.S. report on Friday also showed a rise in the unemployment rate and moderation in wage growth, bolstering expectations of a pause in interest rate hikes.
Meanwhile, expectations for demand recovery elsewhere are growing.
A downturn in euro zone manufacturing eased last month, suggesting the worst may be over for the bloc’s beleaguered factories, while an unexpected rebound in China offered some hope for export-reliant economies, private surveys showed.
Both OPEC and the International Energy Agency are depending on the world’s biggest oil importer, China, to shore up oil demand over the rest of 2023, but the sluggish recovery of the country’s economy has investors concerned.
The remainder of this year promises to bring supply shortage, partly owing to reasonably healthy global consumption and partly because of the Saudi determination to provide a high price floor, said Tamas Varga of oil broker PVM.
“Unless the Chinese economy stages a confident revival next year, the mood will sour markedly,” he said.