Crude oil outages in Nigeria, others, responsible for price recovery

The prices of crude oil have “recovered remarkably” in recent weeks because of supply outages in Nigeria, Iraq and the United Arab Emirates. This is also because there are signs that non-OPEC supply is falling faster than expected.

The price of Brent crude, the equivalent of Nigeria Bonny light, was $40.81 per barrels at the weekend.

According to the International Energy Agency, which monitors energy market trends for the world’s richest nations, in its monthly oil market report, there are signs that prices might have bottomed out.

Over 300,000 barrels of crude oil and substantial volume of gas for domestic use have been shut-in since Shell Petroleum Development Company of Nigeria Limited (SPDC) has declared force majeure on Forcados crude liftings effective February 21, 2016,

This follows the disruption in production caused by the spill on the Forcados terminal subsea crude export pipeline.

The Forcados terminal accounts for over 300,000 barrels of crude oil exported daily and is ranked among the biggest terminals in the country. It does not only serve Shell but Seplat and Nigeria Petroleum Development Company (NPDC).

The incident is also affecting gas supply to major power plants in the country.

Ibe Kachikwu, minister of state for petroleum resources, told the National Assembly that despite the force majoure the country was still able to produce over 2 million barrels of crude oil.

The market report, which was reported by the Cable News Network (CNN), stated that there were also signs that Iran’s return to the oil market might be less dramatic than originally anticipated, as the country was hoping to ramp up production by 500,000 barrels a day immediately after nuclear sanctions were lifted earlier this year. But IEA data show Iran’s production increased by just 220,000 barrels a day in February.

Another thing that affected the price is that fact United States producers removed another 106 rigs from service in February, bringing the total rig count to 76 percent below the peak in October 2014. Brazil, Colombia, China and Kazakhstan also slashed their production plans in February, the IEA said.

Prices got additional boost in February on signs that some big oil producers might cut production. Saudi Arabia and Russia agreed to freeze production at January levels, provided other countries sign up too.

Rumours about a wider agreement keep appearing, but the IEA said it “is rather unlikely that an agreement will affect the supply/demand balance substantially.”

The agency however warned that the recent jump in prices should not be taken as a “definitive sign that the worst is necessarily over.”

That’s because global oil demand growth is still expected to slow this year, to 1.2 million barrels a day from 1.8 million barrels a day in 2015. Demand is under pressure because of the uncertainty in global economy, China’s slowdown, and the stronger dollar.