Nigeria’s oil export is expected to exceed two million barrels per day (bpd) in August but this is coming at a time oil prices look bearish, falling below US$45 Wednesday, a seven month low. As at yesterday evening, Brent crude, with which Nigeria’s crude oil grade is benchmarked, was selling at US$44.84 per barrel, closer to the 2017 budget price of US$44.50.
Crude oil prices have fallen by more than 20 percent this year already, an indication say oil analysts that the prices have entered bearish territory. This is the worst performance for oil prices in the first six month of any year since 1997, according to oil traders with many now saying that they can rule out the possibility of oil prices falling to US$40 per barrel, which will be more than US$4 below Nigeria’s price 2017 price target.
Current prices are only slightly above the prices seen in November 2015 when OPEC members and 10 other non-members met in Austria to cut production to shore up prices and reduce a supply glut.
Nigeria’s is exempted from an agreement by OPEC members to cut oil production and that has allowed it to expand production after a significant drop in militant activities in the South South, enabling oil firms to resume production from previously shut oil wells.
According to preliminary loading plans compiled by Reuters, Nigeria’s crude oil export will hit 2.02 million bpd in August as 67 cargoes are scheduled in August, with an additional 97,000 bpd of Akpo condensate.
The export plan is the highest since March 2016, which was scheduled at roughly the same level until a militant attack on the Trans Forcados Pipeline shut down Forcados exports in February of that year.
Reuters said Forcados loadings resumed in late May, after operator, Royal Dutch Shell lifted force majeure on the grade early this month. While Bonny Light, also operated by Shell, is now under force majeure due to a pipeline leak on one of its two export lines, the grade is still flowing with loading delays of roughly 10 days, traders said.
Nigeria’s engagement with militants in the Niger Delta is paying off, as a lull in militancy is leading to resurging production and will further put pressure on efforts by OPEC to trim output to beef up prices.
Amrita Sen, Energy Aspect’s Chief Oil Analyst, told CNBC Africa that while she would not dare predict the level at which oil prices could stabilise, she refused to rule out the possibility that prices could slip below $40 a barrel in the short-term.
“This is like a falling knife right now, I genuinely haven’t seen sentiment this bad ever,” Amrita Sen, the co-founder and chief oil analyst at Energy Aspects said.
“We have had clients emailing saying they have been trading this for 20 or 30 years and they have never seen something like this,” she added.
Production recovery from Nigeria and Libya is billed to add further pressure to the market. The increase comes as Libyan oil production is also rebounding, hitting 85,000 bpd this week and targeting 1million bpd by July.
Libya and Nigeria were both exempt from OPEC-organised production cuts with non-member nations of 1.8 million bpd, and their resurgence has added to a glut of light sweet crude in the Atlantic Basin that is holding benchmark oil prices near seven-month lows.
The bearish outlook for the oil industry comes as NNPC released it financial performance record for April this year showing it recorded a trading deficit of N5.27Billion in April, 2017.
The NNPC blamed the challenging environment in which it operated for the loss.
The deficit,which was revealed in its April report however indicated a 6.20 percent decrease from the previous month’s record of N5.62Billion.
In its April, 2017 Financial and Operations Report, the corporation said the Group operating revenue for the months of March 2017 and April 2017 stood at N354.65billion and N327.47billion respectively, though representing 149.27 percent and 135.64 percent respectively of monthly budget.
But operating expenditure for the same periods were N360.19billion and N326.88billion respectively, which also represent 171.77 percent and 156.16 percent of budget for the months respectively.
The NNPC blames the deficit to expenses by its subsidiaries, including huge expenses NPMC/NPSC/ML and lowered NPDC revenue.
“Other factors that impacted the overall NNPC’s performance include production shutdown of Trans Niger Pipeline (TNP) and Nembe Creek Trunk Line (NCTL) due to pipeline leakages, shut down of Bonga Terminal for TAM and existing Force Majeure declared by SPDC as a result of the vandalized 48-inch Forcados export line after the restoration on 17th October, 2016,” the Corporation stated in the report.
Meanwhile, total crude processed by the three refineries(KRPC,PHRC& WRPC) for the month of April 2017 was 447,738MT(3,282,814.13bbls) which translates to a combined yield efficiency of 87.83 percent.
Notably,for the month of April 2017, the three Refineries produced 307,946MT of finished petroleum Products out of 447,738MT of Crude processed at a combined capacity utilisation of 24.59 percent compared to 13.46 percent combined capacity utilization achieved in the month of March 2017.
The corporation also attributed improved operational performance is attributed to increase in crude oil available for production by 23.89 percent relative to last month total available crude oil for refining.
It further expressed optimism that the ongoing revamping of the Refineries will enhance capacity utilisation once completed.
With respect to the dollar payments to Federation Account,a total export sale of $158.03 million was recorded in April 2017.This is $203.92 million lower than the preceding month’s performance of $361.95 Million.
Moreso,crude oil export sales contributed $71.81(or45.44%) of the dollar transactions compared with $255.50 Million contribution in the previous month.
Also,export Gas sales amounted to $86.21 Million in the month. The April 2016 to April 2017 Crude oil and Gas transactions indicate that Crude oil and Gas worth $2,279.54 Million was exported.
Also, total export proceeds of $142.12 million were recorded in April 2017 as receipt against $404.55Million in March 2017. Most notably, contribution from crude oil amounted to $71.81million;while Gas and Miscelleneous reciept stood at $70.29 million and $0.013 million.
The total export proceeds reciept of $142.12 Million was remitted to fund the JV cash Call for the month of April 2017 to guarantee current and future production.
As regards naira payment into federation account, the domestic crude oil and Gas receipt during the month amounted to N142.09 Billion, consisting of N2.23 Billion from Domestic Gas and the sum of N139.86 Billion from domestic crude oil.
Out of the naira receipt, the sum of N46.54 Billion was transferred to joint Venture Cash call(JVCC) being a first line charge and to guarantee continuous flow of revenue stream to federation account, the report revealed.
Meanwhile, NNPC transferred the sum of N95.56 billion into federation account during the month under review from the net domestic crude oil and gas receipt. This includes Gas receipts of N2.23Billion.No refund was made to FG in respect in respect of N450 Billion indebtedness as the debt has been fully repaid.
From April 2016 to April 2017, Federation, JV,and FG received the sum N798.63 Billion and N75.96 Billion respectively.
ISAAC ANYAOGU, With Agency Report, & Harrison Edeh, Abuja
