Nigeria’s woes worsen OPEC+ underproduction to 3.6 mbd

Sopuruchi Onwuka, with agency reports

Steady decline in Nigeria’s official crude oil export figures contributes to collective production underperformance by coalition of global oil exporters hosted in the OPEC+.

According to agency sources citing logistics data, Nigeria suffered her lowest export figures in recent decades; with the figures falling below the 1.0 million barrels per day (mbd) mark in August.

 Official figures from the Nigerian National Petroleum Company (NNPC) Limited normally comes in its traditionally belated monthly financial and operating report, but the August figures came from oil export analytics firm Petro-Logistics.

Accounting mess between the NNPC Limited and its partners in the industry as well as widespread production losses by syndicates that have successfully overwhelmed the nation’s security agencies have caused multinational players to stall investments in reserves and production growth.

There are signals that traditional multinationals are approaching their final phase of operations in the nation’s deepwater terrains which are currently less vulnerable than the onshore and shallow water terrains.

Thus, persistent underinvestment in the Nigerian oil industry and the worsening oil theft from production and facilities have forced many foreign firms to embark on investment recovery through divestment programmes.

The result is that declining reserves, falling output, production losses and accounting gaps have all caught up with Nigeria’s official export figures, impacting on the overall market supply performance of the Organization of Petroleum Exporting Countries (OPEC) and its non-member allies in the OPEC+ arrangement.

According to reports by agency sources collated by The Oracle Today, the OPEC+ group has continued to underperform its collective oil production target, posting a massive deficit of significant 3.58 mbd in August.

According to delegates and OPEC data reported by Argus media, the 10 OPEC members bound by the pact saw their collective crude oil production hit 1.399 million bpd below the quota, while the non-OPEC producers in the deal were more than 2 million bpd behind quota, at 2.185 million bpd, per OPEC data Argus has seen.

In July, OPEC+ was already 2.9 million bpd below its target.

In August, the two biggest laggards in production quotas were Russia of the non-OPEC group and Nigeria of OPEC, the data showed. Russia’s oil production was 1.25 million bpd below its target, while Nigeria was 700,000 bpd behind its quota.

Russia’s output is constrained by the Western sanctions following the Russian invasion of Ukraine, while Nigeria has had troubles for years with a lack of investment and oil theft.

OPEC+ was widely expected to continue to underperform by a lot compared to its production targets for July and August after the group decided to accelerate the rollback of the cuts and have them completely unwound by the end of August.

The underperformance in September will be even higher because the group lifted its collective target by 100,000 bpd for the month of September. This increase will be reversed in October, OPEC+ decided at a meeting earlier this month.

The last time Saudi Prince Abdulaziz hinted at a new OPEC+ action, crude prices shot past $100 per barrel; and the OPEC+ Kingpin used the words ‘extreme volatility’ and ‘thin liquidity’ to describe the market as he called for increased stability.

But with OPEC+ falling almost 3 million barrels per day behind its output target, the prospect of new output cuts on paper wasn’t enough to keep crude prices elevated. 

Not even a month after Prince Abdulaziz’s last market-shaking announcement, all eyes are on OPEC+ again, with oil prices sitting right around $90 per barrel.

Slamming the ‘paper markets,’ OPEC+ said that the recent sell-off was the result of “erroneous signals” and that “heavy sell-offs in futures markets are elevating market volatility.”