Nigeria’s oil production stagnates as crude grades fall below $90

The Organization of the Petroleum Exporting Countries (OPEC) Monthly Oil Market Report for June revealed that Nigeria produced 1.27 million barrels per day (bpd) in June. This reflects a slight decline from 1.28 million bpd in April to 1.25 million bpd in May.

According to OPEC’s secondary sources, production decreased from 1.37 million bpd in May to 1.36 million bpd in June.

Although there has been little progress based on OPEC’s recent data, Nigeria’s economic problems persist as it continually borrows money to offset the sustained decline in foreign cash inflow amid weak oil output. Nigeria, the continent’s leading producer of crude oil, is home to Africa’s second-largest oil reserves.

Crude oil exports account for more than 80 per cent of Nigeria’s foreign exchange revenues, declines in output have negatively impacted the country’s economic fortune

The price of a barrel of crude oil has been stable for a while now at over $80, yet Nigeria has not increased output significantly during that time. The nation has attributed its ongoing incapacity to increase production considerably to years of underinvestment, major acts of vandalism against oil assets, oil theft, and decaying infrastructure in the Niger Delta.

The West African country turned to borrowing to supplement the meager foreign cash influx into the nation’s foreign exchange market. In the first nine months of 2023, the country borrowed $1.71 billion from overseas lenders to increase foreign exchange inflows.

The Nigerian National Petroleum Company Limited, the country’s state-owned oil company, declared in August of last year that it had obtained a $3.3 billion loan from Cairo-based AfreximBank to repay crude oil. This loan will help the government implement reforms to stabilize the exchange rate market.

Meanwhile, Nigeria’s crude grades, including Brass River, Bonny Light, and Qua Iboe, are trading below $90 per barrel, although they remain higher than the current Brent contract. This is influenced by concerns over China’s negative economic data and rising expectations that the U.S. Federal Reserve may cut its benchmark interest rate as early as September.

Brent futures dropped more than 67 basis points to trade at $84.3 a barrel, while U.S. West Texas Intermediate (WTI) crude declined by more than 70 basis points to $81.3 a barrel.

SOURCE: Blueprint