Outages in Nigeria, Others Push Oil Price to $80pb

Production hitches in Nigeria, Libya and Ecuador pushed oil price to $80 per barrel amid rapid spread of the Omicron coronavirus variant, it was learnt last night.

Brent crude rose by 0.8 per cent to $79.20 a barrel. United States (U.S.) West Texas Intermediate (WTI) crude rose 0.8per cent, to $76.14.

Both contracts traded at their highest levels in a month, aided by strength in U.S. equities.

Shell Petroleum Development Company (SPDC) had declared a force majeure on exports of Forcados crude oil after a malfunctioning barge obstructed a tanker path.

The SPDC, a subsidiary of the Royal Dutch Shell Plc in Nigerian, declared force majeure on Forcados shipments, effective from 12 noon on Monday, promising that efforts were underway to restore access.

Forcados is Nigeria’s sweet crude blend with an average output of about 200,000 barrels a day.

The shutdown comes a month after Shell said it was restoring flows from its Bonny facility.

Last month, Nigeria regained the top spot in Africa, producing an average of 1.27 million barrels per day (mb/d).

Libya had clinched the top spot in Africa in October with 1.24 mb/d.

The oil and gas sector accounts for about 10 percent of Nigeria’s GDP and petroleum exports around 86 per cent of revenue, according to the Organisation of Petroleum Exporting Countries (OPEC).

The halt in crude shipments from Nigeria’s Forcados will further increase the ongoing issues that have reduced crude oil export sales in recent months.

Already, Nigeria’s Q3 crude oil production dipped to 1.57mb/d from the 1.61mbl in Q1 of 2021, according to the National Bureau of Statistics (NBS).

This was contained in the “Nigerian Gross Domestic Product (GDP) Q3 2021 Report,” obtained by The Nation yesterday.

The report said: “The nation in the third quarter of 2021 recorded an average daily oil production of 1.57 million barrels per day (mbpd), lower than the daily average production of 1.67mbpd recorded in the same quarter of 2020 by 0.10mbpd and lower than the second quarter 2021 production volume of 1.61mbpd by 0.05mbpd.”

The NBS said real growth of the oil sector was –10.73 per cent (year-on-year) in Q3 2021 indicating an increase by 3.16 per cent points relative to the rate recorded in the corresponding quarter of 2020.

Growth, said the report, increased by 1.92per cent points when compared to Q2 2021 which was –12.65 per cent.

On Quarter-on-Quarter, the Bureau said the oil sector recorded a growth rate of 12.05per cent in Q3 2021.

NBS noted that the Oil sector contributed 7.49per cent to total real GDP in Q3 2021, down from figures recorded in the corresponding period of 2020 and up compared to the preceding quarter, where it contributed 8.73per cent and 7.42per cent respectively.

Continuing, the document said the non-oil sector grew by 5.44per cent in real terms during the reference quarter (Q3 2021).

According to the report, this was higher by 7.95per cent point compared to the rate recorded in the same quarter of 2020 and 1.30per cent point lower than the second quarter of 2021.

It noted that this sector was driven in third quarter mainly by trade, information and communication (telecommunication); other drivers include Financial and insurance (financial institutions); manufacturing (nood, beverage & tobacco); agriculture (crop production); and transportation and storage (road transport), accounting for positive GDP growth.

The NBS said in real terms, the Non-Oil sector contributed 92.51per cent to the nation’s GDP in third quarter 2021, higher from the share recorded in the third quarter of 2020 which was 91.27 per cent and lower than the second quarter of 2021 recorded as 92.58 per cent.

Oil analyst at UBS, Giovanni Staunovo, said support for the oil price rally comes as well from high aggregated production disruptions in Ecuador, Libya and Nigeria and the expectation of another large drop in U.S. crude inventories.

The three oil producers declared forces majeures this month on part of their oil production because of maintenance issues and oilfield shutdowns.

Meanwhile, a preliminary Reuters poll showed on Monday that U.S. crude oil inventories are likely to have dropped for the fifth week in a row, while gasoline inventories were seen mostly unchanged last week.

England will not face any new COVID-19 restrictions before the end of 2021, British health minister Sajid Javid said on Monday, as the government awaits more evidence on whether the health service can cope with high infection rates.

U.S. President Joe Biden, meanwhile, pledged to ease a shortage of COVID-19 tests as the Omicron variant threatens to overwhelm hospitals and stifle travel plans.

Omicron-induced staff shortages led to thousands of flight cancellations over the Christmas weekend in the United States.

Investors are awaiting an OPEC+ meeting on Jan. 4, at which the alliance will decide whether to go ahead with a planned production increase of 400,000 barrels per day in February.

At its last meeting, OPEC+ stuck to its plans to boost output for January despite Omicron.

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