Nigeria’s Brass River, Bonny Light, and Qua Iboe have edged much higher than the current Brent contract amid supply concerns over Libya and a smaller-than-expected draw in U.S. crude oil inventories, which depleted demand expectations.
Brass River and Qua Iboe traded at about $81.60 a barrel late Tuesday, while Brent Crude, the major oil benchmark, traded at around $78 per barrel at the time of this publication.
Brent Crude lost more than 1% on Wednesday after data showed U.S. crude inventories dropped by 846,000 barrels to 425.2 million last week.
Nigeria’s Oil Production Shows Signs of Improvement
The Nigerian economy has recently been buoyed by improved fundamentals in the country’s fragile oil sector. The local economy expanded more quickly in the second quarter, with increased crude production offsetting the negative effects of the naira’s devaluation on the growth of the non-oil industry. Data from the National Bureau of Statistics showed Nigeria’s gross domestic product grew by 3.19 percent annually in the three months ending in June, up from 2.98 percent in the previous quarter.
President Bola Tinubu has introduced a series of economic reforms since taking office in May 2023 to attract foreign investment, which have increased production in Nigeria. According to Finance Minister Wale Edun, the federal government is aiming for an economic growth rate of 3% this year, up from 2% last year, and a return to 6% in the coming years, a rate last attained in 2014.
NBS data highlighted that the country’s oil production increased to 1.41 million barrels per day in the second quarter from 1.22 million barrels per day in the previous year. Nigeria’s continued inability to meet its OPEC production requirements prompted the NNPC to declare a state of emergency in the sector during the recently concluded Nigeria Oil and Gas Conference and Exhibition (NOG) in Abuja. Oritsemeyiwa Eyesan, executive vice president of the Nigerian National Petroleum Corporation (NNPC), stated that by the end of this year, daily oil production in Nigeria, the largest oil producer in Africa, is anticipated to increase to roughly 2 million barrels per day.
The Bola Tinubu-led administration received support yesterday from oil and gas marketers affiliated with the Natural Oil and Gas Suppliers Association of Nigeria (NOGASA) for its order to the Nigerian state oil company to sell crude oil to Nigerian refineries in naira. The President of the Group, Mr. Benneth Korie, advocated for the federal government to stop petroleum products from being smuggled across Nigerian borders.
Korie contended that there was insufficient justification for increasing the local price of goods due to smuggling and emphasized that the government needed to take action to address the threat, even if it meant changing the customs officers in charge of the borders. He stated that the success of efforts to ensure adequate access to and availability of refined petroleum products across the country depended heavily on these issues. According to Korie, Nigeria’s economy can be rebuilt by addressing the challenges associated with smuggling, developing the agricultural sector, expanding the nation’s transportation infrastructure, and addressing multiple taxation issues.
Power Struggle in Libya Supports Crude Oil Prices
Disruptions of between 900,000 and 1 million barrels per day (bpd) have been estimated by one consulting firm to have occurred for several weeks in Libya, where some oilfields have stopped production due to a struggle for control of Libya’s central bank. The North African country produced roughly 1.18 million barrels per day in July. In October, OPEC+ production plans may be impacted by the duration of the supply disruption. If supply does not ease as anticipated, this could positively impact the oil markets.
Meanwhile, Federal Reserve Bank of Atlanta President Raphael Bostic stated that the FOMC might start reducing interest rates next month, as unemployment has increased more than expected and inflation has decreased more than anticipated. This narrative has also boosted oil prices.
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