***As major oil-consuming nations tackle COVID-19
***Experts task FG on diversification
By Udeme Akpan
With the successful tackling of the coronavirus pandemic, there are indications that the global oil demand would rise from 93.22 million barrels per day, mb/d to 97.94 mb/d, thus recording an increase of 5.06 per cent between the first and fourth quarter of 2021, according to the Organisation of Petroleum Exporting Countries, OPEC.
This appears to be good news for Nigeria, and other oil-dependent countries, whose economies were greatly affected by the pandemic, which culminated in lockdown, limited demand, price collapse, low revenue, and by extension slide in the Gross Domestic Product, GDP.
However, in its February 2021 Oil Market Report, obtained by Energy Vanguard, the organisation, stated that Quarter on Quarter, QoQ, the global oil demand would stand at 93.22 mb/d in the first quarter (January – March) of 2021, showing an increase of 0.13 per cent compared to 93.10 mb/d recorded in the corresponding period of 2020.
It further showed that QoQ, it would rise to 95.92 mb/d in the second quarter (April-June) of 2021, indicating an increase of 14.4 per cent, compared to 83.82 mb/d recorded in the corresponding period of 2020.
Also, it showed that the demand would hit 97.02 mb/d in the third quarter (July-September) of 2021, showing an increase of 6.4 per cent, compared to 91.18 mb/d, recorded in the corresponding period of 2020.
The report, which did not provide Month on Month, MoM estimates, also showed that the demand would further rise to 97.94 mb/d in the fourth quarter of 2021, indicating an increase of 4.3% compared to 93.89 mb/d recorded in the corresponding period of 2020.
The target or prediction is to be driven by actions of OPEC, and Non-OPEC members in the coming months.
In their 14th Meeting of OPEC and non-OPEC ministers, which took place via video conference on Thursday, March 4, 2021, under the Chairmanship of HRH Prince Abdul Aziz bin Salman, Saudi Arabia’s Minister of Energy, and Co-Chair HE Alexander Novak, Deputy Prime Minister of the Russian Federation, some major decisions were taken to impact on the market.
According to OPEC, “The meeting emphasized the ongoing positive contributions of the Declaration of Cooperation (DoC) in supporting a rebalancing of the global oil market in line with the historic decisions taken at the 10th (Extraordinary) OPEC and non-OPEC Ministerial Meeting on 12 April 2020 to adjust downwards overall crude oil production and subsequent decisions.
“The ministers noted, with gratitude, the significant voluntary extra supply reduction made by Saudi Arabia, which took effect on 1 February for two months, which supported the stability of the market.
“The Ministers also commended Saudi Arabia for the extension of the additional voluntary adjustments of one mb/d for the month of April 2021, exemplifying its leadership, and demonstrating its flexible and pre-emptive approach.
“The ministers approved a continuation of the production levels of March for the month of April, with the exception of Russia and Kazakhstan, which will be allowed to increase production by 130 and 20 thousand barrels per day respectively, due to continued seasonal consumption patterns.
“The Meeting reviewed the monthly report prepared by the Joint Technical Committee (JTC), including the crude oil production data for the month of February.
“It welcomed the positive performance of participating countries. Overall conformity with the original decision was 103 per cent, reinforcing the trend of aggregate high conformity by participating countries.
“The Meeting noted that since the April 2020 meeting, OPEC and non-OPEC countries had withheld 2.3bn barrels of oil by end of January 2021, accelerating the oil market rebalancing.
“The meeting extended special thanks to Nigeria for achieving full conformity in January 2021, and compensating its entire overproduced volumes.
“The ministers thanked Timipre Sylva, Minister of State for Petroleum Resources of Nigeria, for his shuttle diplomacy as Special Envoy of the JMMC to Congo, Equatorial Guinea, Gabon, and South Sudan to discuss matters pertaining to conformity levels with the voluntary production adjustments and compensation of over-produced volumes.
“In this regards the ministers agreed to the request by several countries, which have not yet completed their compensation, for an extension of the compensation period until the end of July 2021.
“It urged all participants to achieve full conformity and make up for previous compensation shortfalls, to reach the objective of market rebalancing, and avoid undue delay in the process.
“The Meeting observed that in December, stocks in OECD countries had fallen for the fifth consecutive month.
“The Meeting recognized the recent improvement in the market sentiment by the acceptance and the rollout of vaccine programs and additional stimulus packages in key economies, but cautioned all participating countries to remain vigilant and flexible given the uncertain market conditions, and to remain on the course which had been voluntarily decided and which had hitherto reaped rewards.”
These decisions have caused the prices of many crudes to rise in the international market. For instance, the price of Brent, which had hovered at an average of $65 before the meeting, leaped to $68, before hitting the current $70.77 per barrel, while the price of Nigeria’s Bonny Light, also rose from $64 to the current $67.69 per barrel.
With the improved situation, Nigeria would not be under pressure to generate adequate funds for the implementation of its 2021 budget, which was benchmarked on $40 per barrel, and 1.8 mb/d output, including Condensate.
In his presentation to the National Assembly, President Muhammadu Buhari, had stated: “The 2021-2023 Medium Term Expenditure Framework and Fiscal Strategy Paper set out the parameters for the 2021 Budget, which include: Benchmark oil price of 40 US Dollars per barrel.
Daily oil production estimate of 1.86 million barrels (inclusive of Condensates of 300,000 to 400,000 barrels per day). Exchange rate of N379 per US Dollar; and GDP growth projected at 3.0 per cent and inflation closing at 11.95 per cent.”
Nevertheless, in an interview with Energy Vanguard, Prof. Omowumi Iledare, the Ghana National Petroleum Corporation (GNPC) Professorial Chair in Oil and Gas Economics and Management, Institute for Oil and Gas Studies, University of Cape Coast, Ghana, said the government should intensify efforts towards diversifying the nation’s economy.
Previously, a Port Harcourt-based energy expert, Dr Bala Zaka, had also harped on the need to diversify the economic base of Nigeria, still centred on crude oil.