Oil Price Risen Above $113 As OPEC Maintains Its supply Levels

The price of crude oil continued to rise yesterday, with Brent, Nigeria’s benchmark crude, rising above $113 per barrel for the first time in nearly eight years. This came as the Organization of Petroleum Exporting Countries (OPEC) decided to keep adding 400,000 barrels per day to the measured volume agreed with its allies, OPEC+, in August last year.

Nigeria will produce 1.735 million barrels per day next month, according to the producers’ group, which decided on the quota for member countries for April. However, it is doubtful that Nigeria will be able to meet its monthly allocation, having been unable to supply the global market with the required volume for nearly a year.

Even though the total amount of oil drilled in that month, roughly 1.4 million bpd, was the highest in several months, the country recorded a deficit of over 300,000 barrels per day.

Because the pump price of petrol in Nigeria, which does not refine a drop of the product, has a positive relationship with international crude oil prices, the controversial subsidy payments in the country will also rise when the computation for this month is completed.

Nigeria should be saving as much as $50 per barrel it sells by now, but the opposite appears to be the case, as the cost of under-recovery continues to rise.

The Nigerian National Petroleum Company (NNPC) Limited claimed to have spent N210.38 billion on petrol subsidies in January 2022 alone.

Furthermore, the oil company failed to remit any money to the federation account last month as a result of the challenge, a development that would severely limit sub-nationals’ ability to meet their financial obligations.

President Muhammadu Buhari recently requested that the National Assembly approve a N2.557 trillion budget for the 2022 petrol subsidy.

Apart from Brent, which surpassed $113 per barrel at the time of writing this report, with a 7.69% increase, West Texas Intermediate (WTI), the US benchmark, also increased to $111.24 per barrel, with a 7.57% increase.

It came as Russia’s flagship crude oil, which was offered for sale at a record low price, drew no bidders, the latest sign that oil trading from the country’s western ports is halting.

Despite the tightening global oil market, OPEC yesterday defied US and some of its allies’ pressure to increase supply, despite the fact that prices were already under pressure prior to Russia’s invasion of Ukraine last week.

Though the United States and other members of the International Energy Agency (IEA) announced a strategic oil reserve release in an attempt to cool prices, it has done little to calm the market.

Despite calls to increase output, the OPEC alliance maintained a daily output of 400,000 barrels.

It did not surprise those who closely followed the oil cartel’s activities, however, because the producer group had insisted that supply was not a problem. Around 40% of the world’s oil supply is controlled by OPEC.

The market remained balanced and did not require further distortions, according to a statement issued after the 26th OPEC and non-OPEC ministerial meeting, which ended yesterday. It stated that the current oil market fundamentals and consensus on its outlook “pointed to a well-balanced market” following the conclusion of the 26th OPEC and non-OPEC ministerial meeting.

“The current volatility is caused by current geopolitical developments, not by changes in market fundamentals,” OPEC said.

“The OPEC and participating non-OPEC oil-producing countries decided to: reaffirm the decision of the 10th ministerial meeting on 12 April 2020, as well as the decisions of subsequent meetings, including the 19th ministerial meeting on 18 July 2021,” it continued.

“It reaffirms the production adjustment plan and monthly production adjustment mechanism approved at the 19th ministerial meeting, as well as the decision to increase monthly overall production by 0.4 mb/d in April 2022.”

“OPEC emphasizes the critical importance of full conformity and the compensation mechanism, taking advantage of the compensation period’s extension until June 30, 2022.”

Compensation plans should be submitted in accordance with the previously agreed procedure, according to the Sanusi Barkindo-led organization, which has scheduled its next meeting for March 31.

Petrol scarcity continues to exist.

Despite the worsening fuel supply situation across the country, the NNPC announced yesterday that it has over 1.7 billion litres of the product on hand.

Mallam Mele Kyari, Group Managing Director, NNPC, told journalists on the sidelines of the Nigeria International Energy Summit (NIES), which entered its fourth day yesterday, that the situation was being exacerbated by motorists who were buying more than they needed.

The NNPC CEO stated that loading is now taking place 24 hours a day across the country, and that the company has enough capacity to meet the country’s current demand.

“We want Nigerians to know that we have a sufficient supply of petroleum products.” We currently have over 1.7 billion litres of gasoline on hand, both marine and land, which means we have enough capacity to load from all depots.

“All of our depots have multiple loading points. This will ensure that spaces (gaps) created by panic buying, such as those seen today in gas stations, are filled,” he explained.

Kyari argued that in a situation like Nigeria’s, people would typically buy more than they require, believing that more supply would solve the problem. “I am confident that you will see relief on this very soon,” he promised.

He stressed that neither the government nor the NNPC had any plans to adjust the price of petrol at the pump or at the ex-depot, and urged marketers to sell at the government-approved prices.

He stated that the NNPC was in talks with industry unions and that the NNPC and the midstream/downstream authority had agreed to impose sanctions on anyone caught doing illegal business.

“We don’t have a shortage in the country, but getting a car takes longer.” We apologize for the inconvenience, but we will be out of here soon,” he said.

He urged motorists to trust the NNPC that there is enough fuel in the country, claiming that panic buying is still a problem. “Let them make sure they don’t buy anything they don’t need because petroleum products will still be available when they return,” he said.

The GMD stated that the directive prohibiting the sale of gasoline in jerry cans would be relaxed soon, noting that the decision was made to ensure filling station safety and avoid overcrowding.

“The issue is that people who would normally buy N3,000 are buying N13,000,” he explained, adding that this was causing the system to slow down.

Although supply disruptions cannot be completely avoided, Kyari believes that recovery time is crucial. According to him, the NNPC was collaborating with security agencies to ensure that black marketers were not exploiting Nigerians.

Earlier, during the main program, the NNPC GMD stated that investment in the oil and gas industry has been stifled for over 50 years due to a lack of the proper framework.

“This is an energy company that also serves as an enabler, and it is a company for all of us.” However, it is the company that is expected to support energy security that is most important.

“And that won’t work unless we work together and create the right environment.” I’m sure we’re all aware of the challenges we’ve faced in putting the right fiscal and regulatory framework in place to ensure that businesses operate in the best possible way and in the best possible business environment.

“In reality, we’ve been struggling with fiscal change and creating the right business environment since 1967.” That means our environment has been frozen for nearly 50 years, and we haven’t changed fundamentally in that time.

“And whether it was intended or not, it had an effect and took a toll.” And it’s very visible in our recent history, in the sense that investment inflows into Sub-Saharan Africa and our country have likely ranged from $3 billion to $5 billion in the last ten years.

“We have done nothing in reality.” And the reason is simple: you don’t have the right fiscal structure, climate, regulatory stability, or framework in place to allow people to predict what will happen next.

“And that’s why, in the aggregate, there’s underinvestment and a lack of growth.” And, of course, it resulted in some other outcomes. Part of it is due to the fact that many of our partners have now invested significantly in all of their ramifications, even for new projects.

“When you look at many of these structures now, you think you’re on the battleground, and many of them also look like museums.” Even in the best of companies, I believe they are not designed to function,” he said.

He stated that now is the right time to turn things around, citing the passage of new legislation, which he said was previously opposed because people did not want to lose power and control.

With the new law, the NNPC will become a commercial company that will pay dividends to its shareholders, Kyari stated that the company will be fully operational by July of this year.

“The combination of these factors means that this company must operate to world-class standards, be fully automated, imbibe transition, and recognize the importance of energy transition,” he explained.

He stated that the company was looking for the right partners, emphasizing the importance of developing Nigeria’s gas resources as a transition fuel.

“Data to Barrel” was the topic of discussion. Gbenga Komolafe, the Chief Executive of the Nigerian Upstream Petroleum Regulatory Agency (NURPC), said the industry needs big data to explore, capture, develop, and produce hydrocarbons, as well as monitor reservoir performance and surveillance in real time.

He explained that the upstream industry was facing challenges that necessitated the use of large amounts of data in reservoir modeling and surveillance with high precision.

“To turn big data into barrels and value for money, superior computing power, high-performance storage capacity, and powerful and integrated mapping applications are required.”

As a result, the primary challenge for service providers in the oil and gas industry is to demonstrate the value that obtaining additional data will add to the asset. As a result, it’s not just about collecting more data, but also about the Value of Information (VOI) derived from that data,” he argued.