Global oil price: Nigeria'll support OPEC resolve to stabilise market, says Kachikwu

Global oil price: Nigeria'll support OPEC resolve to stabilise market, says Kachikwu

The oil cartel is composed of sovereign nation members, but shale oil producers are American private companies, making it harder for OPEC to have intergovernmental contact with the USA shale sector. The oil glut, of which the US shale boom in the USA has contributed to, reduced oil prices and the revenues of oil producing economies.

Prices drifted lower during Thursday's Asian session with buyers unable to make any impression.

In its sector update note today, the research house sees that at US$50 per barrel, major oil companies can initiate a restart to their capex plans, considering the lower cost of production and better efficiencies attained in recent times.

Output was up by 393,000 to 32.611 million barrels per day (bpd) driven by gains from Nigeria and Libya as well as extra barrels from Saudi Arabia and Iraq.

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"This month, there are two hitches: a dramatic recovery in oil production from Libya and Nigeria and a lower rate of compliance by OPEC with its own output agreement", IEA said, adding that the development raised doubts about the pace of rebalancing demand and supply in the oil market. The latest effect of OPEC strategy is the 18% fall of oil futures since the beginning of the year.

Oil dipped on Thursday on persistent worries about oversupply, but strong Chinese imports and signs that US storage tanks are gradually being drained offered some support to prices.

Nevertheless, global oil inventories remain 266mn barrels above the five-year average with producers still finding it very hard to bring total inventories down. Brent, the global benchmark, gained 41 cents, or 0.9%, to $48.15 a barrel on ICE Futures Europe.

Supply issues will tend to remain the dominant short-term focus with more positive rhetoric from OPEC needed to revive confidence, although choppy trading conditions are liable to continue.

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This will leave less space in the market for OPEC oil, the group concluded.

The cuts have stabilized oil at around $45/bbl to $50/bbl, but prices have come under renewed pressure in recent weeks due to growing US output and little evidence of global stocks falling from record highs above 3 billion bbl.

Dr. Kachikwu who briefed newsmen in Abuja noted that Nigeria was already coming short of the projected oil production levels which the budget was premised on.

However, Nigeria and Libya expanded their production last month. "For fellow OPEC members, who agreed to reduce production by 1.2 million barrels per day, to see their cut effectively diluted by almost two-thirds must be very frustrating, especially as their pact has, hitherto, been well observed by historical standards", said the IEA analysts. The U.S. Energy Information Administration on Tuesday lowered its production forecast for 2018 to 9.9 million barrels a day, slightly down from around 10 million before. "Further growth of 1.4 mb/d is foreseen for 2018, with global demand reaching 99.4 mb/d". Militancy, attacks on oil infrastructure, and port terminals blockades have quieted in both African countries, therefore further increases in production are likely.

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