Oil price recovery gains hindered by Nigeria’s stranded cargoes

Nigeria may have to wait for much longer before the benefits of the recent price gains impacts on its revenue due to the increasing number of its stranded crude oil cargoes as a result of the recent struggle to find buyers for Nigeria crude. Recent data show that around 10 million – 12 million barrels of Nigerian crude were stranded on the water from the March program.

According to agency reports, weak buying from Asia and other regular buyers of Nigerian crude oil has left a large overhang of March, April and May cargoes.

India, which recently replaced the United States as Nigeria’s biggest oil market, cut its import of the Nigeria’s crude even though its oil imports increased as a result of drop in oil prices. Buoyed by prospects of a diplomatic deal on Iran’s disputed nuclear programme by end-June, preliminary data show that India shipped in more than 17 per cent more Iranian oil in April than a year before. Six Iranian vessels with about 264,000 barrels per day (bpd) of oil were received in April.

“The top three suppliers of crude oil to China in March are Saudi Arabia, Angola and Russia accounting for 15 percent, 13 percent and 11 percent respectively”, said the OPEC report.

However, Nigeria’s focus on Europe has been further enhanced by reduced interest from other regular customers like Brazil, Indonesia and South Africa.

It is projected that crude oil prices could rise quickly in the second half of the year and may reach $70 per barrel by the end of 2015 as US shale production tapers and seasonal variations increase demand.

Nigeria’s output increased by 19,000 barrels

Nigeria’s crude oil production output for April increased by 19,000 barrels per day (bpd). According to the OPEC monthly oil market report released on Tuesday May 12, 2015, Nigeria’s production output based on secondary sources increased from 1,867,000bpd in March to 1,886,000 bpd in April.

Nigeria also maintained its position as Africa’s number one oil producer in April followed by Angola, Algeria and Libya with an output of 1.612 million bpd, 1.099 million bpd and 468,000bpd respectively.

According to the OPEC report, “total OPEC crude oil production averaged 30.84 million barrels per day in April, an increase of 18,000bpd over the previous month. Crude oil output increased mostly from Iraq and Iran while production showed the largest drop in Angola. OPEC crude oil production, not including Iraq, stood at 27.17 million barrels per day in April, down by 29,000bpd over the previous month”.

The OPEC Reference Basket, supported by various bullish factors, rose in April to its highest value this year increasing by $4.84 or 9.2 percent from $52.46 per barrel in March to $57.30 per barrel in April.

Oil output boost keeps supply surplus 

OPEC said its oil output rose further in April, keeping an excess supply in the market despite stronger demand and signs the producer group’s strategy of letting prices fall to hurt other producers is taking effect.

OPEC said demand for its oil this year would be 50,000 barrels per day (bpd) higher than previously thought, thanks to a slightly lower supply forecast for countries outside the group.

Oil prices have almost halved from $115 a barrel in June 2014, in a decline OPEC officials have said is stimulating fuel use. The report made a small upward revision to forecast oil demand growth in 2015 and was upbeat about the outlook.

“Despite the slow start in some countries, world economic growth could strengthen further as the year progresses, leading to an improvement in crude oil demand in 2015,” the report said.

Last year, OPEC refused to cut its output despite the price collapse, seeking to recover market share by slowing higher-cost production in the United States and elsewhere that had been encouraged by OPEC’s previous policy of keeping prices high at around $100 a barrel.

Instead, key members have raised supply and the report said OPEC pumped an extra 18,000 bpd in April, due to increases in top exporter Saudi Arabia, Iraq and Iran.

According to secondary sources cited by the report, OPEC produced 30.84 million bpd in April, after raising supply by a massive 850,000 bpd in March.

If OPEC keeps pumping at April’s rate, the report indicates there will be an excess supply of 1.52 million bpd in 2015, unchanged from the surplus implied last month.

In a sign OPEC’s strategy to slow rival supply is working, OPEC cut its forecast for the growth in US oil output this year by 40,000 bpd to 700,000 bpd. It left the estimate for all non-OPEC countries’ supply growth unchanged at 680,000 bpd.

FRANK UZUEGBUNAM