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Analysts at Financial Derivatives Company have said that for oil prices to revert to $85 per barrel in the last quarter of 2016, supply growth must firm at 2 million barrels per day by organisation of Petroleum Exporting Countries (OPEC) and deepwater production volume growth to rise to 11.6m barrels per day by 2020.
It was also stated that these conditions may not be realised if there is a deadlock in talks with militants leading to increased insurgency, and fall of oil prices below $40 per barrel may also precipitate a revision of the outcomes.
These were stated in the monthly Economic News and Views Publication of Financial Derivatives Ltd, titled ‘Policies Daunting, Markets Uncertain, Citizens Groaning’ presented by Bismark Rewane, managing director of the company at the Lagos Business School Executive Breakfast Meeting last week.
Some of the positive developments the analysts recorded that occurred in July include an 83 percent increase in FAAC allocations to a high of N559bn, attributed partially to improved tax collection and exchange rate gains. It estimated FAAC allocations for August to N700bn, the highest level in 30 months.
It also reported that oil output rose marginally to 1.52 million barrels per day but that production levels are yet to recover due to pre-militant attack levels. Oil prices drifted lower than $42 per barrel and have recovered to $45 but it expects domestic oil production to say flat in August at approximately 1.5million barrels per day.
It was stated that high expectations followed after oil output in Nigeria marginally rose to 1.52m million barrel per day and militant attacks in Delta are down due to step in counter insurgency. OPEC countries increased production and Saudi Arabia offered discounts, which seemed to stymie Nigeria’s gain.
The financial analysts reported that the oil industry witnessed some lows prominent of which was that- average oil price in July that stood at a 2 month low of $46.51 per barrel, lower than second quarter average of $46.81, and oil prices- entered a bear market, down 22 percent in two months.
“Oil production will remain flat at 1.5million barrels per day and amnesty payments will not ameliorate the attacks. It will only increase the squabbles between the groups,” said Bismark Rewane on the outlook for August.
ISAAC ANYAOGU
