Oil price seen falling despite decreasing rig counts in Canada, Nigeria, US
Decreasing oil rig counts in Canada, Nigeria and U.S. will not keep oil prices from falling a recent report by Oilprice.com states.
The Organisation of Petroleum Exporting Countries and its allies (OPEC+), concerned about rising inventory and failing oil prices reached a consensus to cut oil production by 1.2 million barrels per day out which Nigeria accounts for 50, 000 bpd but this has not stemmed the tide of falling oil prices.
The number of oil rig counts in Nigeria decreased by 6 from 34 in October to 28 in November, according to the Organisation of Petroleum Exporting Countries’ (OPEC) Monthly Oil Market Report published 12 December.
“Continued delay to tackle the Petroleum Industry Governance Bill (PIGB) sends a wrong signal to current and would-be investors. It is either government wants to amend the laws regulating oil and gas or they don’t. Whatever it is, they should come out clear” Ayodele Oni, energy partner at Lagos-based Bloomfield Law Practice said. “Otherwise, it will delay projects, spending and certain activities in the industry, because of the uncertainty and lack of stability.”
Similarly, Baker Hughes reported a 4-rig decrease for oil and gas in the United States last week—a loss in rigs for the third week in a row. The four-rig decline was all on the oil-rig side, with gas rigs holding steady.
The total number of active oil and gas drilling rigs now stands at 1,071 according to the report, with the number of active oil rigs decreasing by 4 to reach 873 and the number of gas rigs holding steady at 198.
Rig count is a function of the level of exploration, development and production activities occurring in the oil and gas sector. A drop in active rig count means oil exploration and production activities in Nigeria or elsewhere have decreased. This will reduce supply to the global market and Crude oil prices fell sharply near the close of the week on Friday despite production losses in OPEC’s Libya and an agreement within OPEC+ to cut 1.2 million bpd from the expanded cartel’s October production.
The Western Texas Intermediate benchmark was trading down 2.26% (-$1.19) at $51.39—a loss of more than $2 per barrel week over week—at 11:39am EST. Brent crude was trading down 1.84% (-$1.13) at $60.32—also down more than $2 per barrel from last week.
Canada’s oil and gas rigs for the week ending December 14 decreased by 12 rigs this week after losing 17 rigs last week, bringing its total oil and gas rig count to 174, which is 64 fewer rigs than this time last year, with a 7-rig decrease for oil rigs, and a 5-rig decrease for gas rigs.
The Energy Information Administration’s estimates for US production for the week ending December 7 continues to weigh on prices, averaging 11.6 million bpd—a drop off from the previous 11.7 million bpd for the previous four weeks.
Nigeria’s falling rig count is attributable to a reduction in foreign investment into the sector. According to data obtained from the National Bureau of Statistics, (NBS) Nigerian Capital Importation report for the second quarter of 2018, foreign capital inflow into the oil and gas industry declined by $60.77 million, about N18.6 billion, to $24.85 million, about N7.6 billion in the second quarter of 2018, compared to $85.62 million, about N26.2 billion recorded in the first quarter.
Nigeria’s active oil rigs had remained static at 32 since the first quarter of the year. In 2015, Nigeria had recorded 30 oil rig counts. In 2016, it decreased to 25, and later to 28 early 2017.
Brent crude sold for fell by 1.90 percent to $60.28 and Western Texas Intermediate (WTI) lost 2.62 percent to close the week at $51.20.
STEPHEN ONYEKWELU