The nation’s oil output, which was drastically reduced by militant attacks last year, recovered to an average of 1.64 million barrels per day last month from 1.5 million bpd in December, according to data compiled by Bloomberg.
But production and exports of Nigeria’s popular crude grade, Forcados, continued to be shut in due to a sabotage-related spill on the subsea Forcados pipeline.
Industry analysts have said the decision by the Organisation of Petroleum Exporting Countries to cut output by over 1.2 million bpd, coupled with another 600,000 bpd cut by a group of non-OPEC countries, will tighten oil supply and result in higher crude oil prices.
Analysts from Ecobank forecast oil prices to average $48.74 this year and range between $38 and $63. Global benchmark, Brent crude, traded around $56 on Friday.
The Head of Energy Research, Ecobank Group, Mr. Dolapo Oni, said these higher oil prices could potentially make it attractive for US oil exports to reach markets as far as Asia.
He said, “Already, a few traders such as Trafigura and oil producer BP’s trading arm are arranging cargoes to Asia; we suspect that as oil prices stabilise in the higher 50s, we could see more of these sort of trades.
“This could potentially create a challenge for Nigerian crude grades, resulting in a similar cut in prices across grades such as had to be done in 2016.”
Oni stated that while Nigeria managed to export an average of 200,000 bpd to the US in 2016 due to decline in shale production, resurgence in shale production as oil prices rise and stay above $50 could see the country’s exports to the US also shrink.
“Another challenge is also the rise in Libyan oil output, which could potentially challenge Nigeria’s cargoes in Europe,” he said.
He noted that Libya was also exempted from the OPEC cut like Nigeria and “is looking to ramp up production from 685,000 bpd currently to over one million bpd by the end of 2017, most of which will be targeted at refineries in Europe, which find Nigerian crude equally attractive or comparable.
“This could potentially put pressure on the official selling prices of Nigerian crude grades, and create extended overhangs of crude cargoes and revenue cycles, etc.,” Oni said.
The country’s oil differentials fell to their lowest in more than a year in January as surplus cargoes struggled to find outlets in a market oversupplied with light crude oil, according to Reuters.
Sellers slashed premiums for Qua Iboe to as low as 50 cents per barrel versus dated Brent, with traded values expected below that.