Nigeria: Nigerian oil production edges down in June
Brent crude oil prices averaged USD 82.92 per barrel in June, down 0.2% from May. On 28 June, the commodity traded at USD 86.43 per barrel, up 5.7% from 31 May. Prices initially dipped due to OPEC+’s unexpected decision on 2 June to begin winding down output curbs from October but rose towards the end of the month due to rising tensions between Israel and Hezbollah.
Turning to production, Nigerian oil output ticked down to 1.36 million barrels per day (mbpd) in June from 1.37 mbpd in May, remaining below the 10-year average of 1.60 mbpd but coming in slightly above 2023’s average of 1.31 mbpd.
In other news, in early July, Nigeria’s state energy firm NNPC declared a state of emergency on production in the country’s oil and gas sector in a bid to clear obstacles to production, such as delays in the procurement process. NNPC sees scope for the country to reach 2.00 mbpd without launching new rigs if industry players operate in a timely manner.
In 2024 as a whole, oil production is projected to increase from last year’s level, boosted by an improved security situation in the Niger Delta. Moreover, rising output in the Dangote refinery should enhance the petroleum sector after years of being almost entirely reliant on imports; the refinery should turn Nigeria into a net exporter of fuels. The recently declared state of emergency on production should add further impetus. Nonetheless, oil production is set to remain below both the 10-year average of 1.60 mbpd and the 1.50 mbdp OPEC+ target. Renewed disruptions in the Niger Delta are a key downside risk.
Brendon Verster, economist at Oxford Economics, commented:
“We are tentatively upbeat that Nigeria’s hydrocarbon sector will strengthen in H2 2024, with the NNPC adding 40,000 [barrels per day] in crude oil supplies from a new oilfield in the Niger Delta on May 6.”