Nigeria turns an OPEC laggard as oil demand surges above 100 mbd

Sopuruchi Onwuka

Nigeria’s crude oil production maintained fluctuating trend in December 2021, shedding 43,000 barrels per day to end the year at 1.338 million barrels per day.

 According to the Monthly Oil Market Report of the Organization of Petroleum Exporting Countries (OMOMAR), Nigeria’s oil output is certain to fall below the annual average of 1.579 million barrels per day recorded in 2020 when oil demand destruction forced OPEC and 10 non-member producers to drastically slash output in desperate effort to arrest value erosion.

However, whereas the coalition of producers has embarked on gradual restoration of supply in response to demand recovery, Nigeria has continued to indicate loss of capacity for production recovery from pandemic lows. The country has remained unable to meet her assigned quotas.

According to OPEC’s oil market report for January, Nigeria’s average annual oil supply to the market dipped by 98,000 barrels per day from 1.579 million barrels per day in 2020 to 1.381 million barrels per day in 2021.

However the year on year output dip is compensated by significant surge in the average market value of the country’s signature crude oil grade, the Bonny Light, which jumped from $41.53 per barrel in 2020 to $70.63 per barrel in 2021.

Despite the annual average, OPEC declared in the report that all its reference basket of crude oil grades performed poorly in December, “falling for the second consecutive month on lower related crude benchmarks, though higher official selling prices and sustained crude differentials led to a smaller decline compared with major crude benchmarks.

“In December, the ORB fell by $5.99, or 7.5%, to settle at $74.38/b, its lowest monthly value since September 2021. However, on a yearly average, the ORB rose by $28.42, or 68.5%, in 2021 to $69.89/b, the highest yearly average since 2014.

“All ORB component values declined in December, with West and North African Basket components – Bonny Light, Djeno, Es Sider, Girassol, Rabi Light, Sahara Blend and Zafiro – falling $7.04, or 8.8% m-o-m on average, to $73.30/b.

“Multiple region destination grades – Arab Light, Basrah Light, Iran Heavy and Kuwait Export – decreased by $5.61, or 7.0% m-o-m on average, to settle at $74.91/b. Murban crude fell by $7.49, or 9.1% m-o-m on average, to settle at $74.57/b. Merey crude also fell by $6.32, or 10.3% m-o-m on average, to settle at 54.89/b,” OPEC stated.

According to the report made available to The Oracle Today by the OPEC secretariat, Nigeria’s quarterly liquids supply to the market in the last nine months of 2021 maintained steady decline from 1.424 million barrels per day in the second quarter to 1.349 million barrels per day in the thirds quarter, and to 1.342 million barrels per day in the last quarter.

The 43,000 barrels per day deficit posted by Nigeria and 84,000 barrels per day dip recorded for Libya formed the only production cut by OPEC in December, 2021. The shortfall however pulled overall OPEC production boost down to 166,000 barrels per day.

Angola led production boost by the group by adding 85,000 barrels per day to its November figure of 1.082 million barrels per day grow output to 1.166 million barrels per day in December. Saudi Arabia followed with 61,000 barrels per day from 9.871 million barrels per day in November to 9.932 million barrels per day in December.

Iraq and the United Arab Emirates (UAE) added 28,000 barrels per day each; Kuwait increased output by 21,000 barrels per day; Venezuela topped 20,000 barrels per day;   and Equatorial Guinea followed with 14,000 barrels per day.

Other countries that increased output in the month include Gabon which added 11,000 barrels per day; Algeria with 10,000 barrels per day; Iran with 8,000 barrels per day; and Congo which came with additional 7,000 barrels per day.

Total OPEC output to the market in December rose 166,000 barrels per day month on month to 27.882 million barrels per day.

Demand for OPEC crude in 2021 remains unchanged from the previous month to stand at 27.8 mb/d, around 4.9 mb/d higher than in 2020, according to the report. And demand for OPEC crude in 2022 also remains unchanged from the previous month to stand at 28.9 mb/d, around 1.0 mb/d higher than in 2021.

OPEC stated that world oil demand growth forecast remains stable at 5.7 million barrels per day to average 96.6 million barrels per day in 2021; and 4.2 million barrels per day with total global consumption estimated at 100.8 million barrels per day in 2022.

Non-OPEC liquids supply growth forecast remained unchanged in January at 0.7 percent year on year to average 63.6 million barrels per day in 2021.  For 2022, the non-OPEC liquids supply growth is forecast at 3.0 million barrels per day to average 66.7 million barrels per day.

Production in 2022 is expected to be led by United States and Russia followed by Brazil, Canada, Kazakhstan, Norway and Guyana.  

OPEC expects ease of restrictions and associated economic recovery across the globe; saying that the impact of the Omicron variant of SARS-COV-2, the virus that causes the novel coronavirus disease also called COVID-19, to be mild and shortlived. The organization of oil factors also downplayed the possibility of additional variants and hospitalizations impacting the global workforce.

OPEC’s forecast for the global average gross domestic product (GDP) remains unchanged at 5.5 percent for 2021 and 4.2 percent 2022, with India leading growth at 8.8 percent in 2021 and 7.0 percent in 2022.

China follows with annual growth average of 8.0 percent in 2021 and 5.6 percent in 2022.

OPEC reported that the spread of variants of the dreaded coronavirus disease and spirited deployment of vaccines by governments to battle the global pandemic would continue to cause distortions and sustain uncertainties in the global economy.

“Moreover, supply chain bottlenecks and sovereign debt levels in many regions, together with inflationary pressures and responses by central banks remain key factors that require close monitoring,” OPEC stated.