Nigeria: Nigerian oil production rises in July
Brent crude oil prices averaged USD 84.05 per barrel in July, up 1.4% from June. On 31 July, the commodity traded at USD 80.64 per barrel, down 6.7% from 28 June. Prices rose to a three-month high in July as supply was constrained by OPEC+ cuts and demand prospects were boosted by lower-than-expected U.S. inflation.
Turning to production, Nigerian oil output rose to 1.39 million barrels per day (mbpd) in July from 1.37 mbdp in June, remaining under 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 August, the country unveiled a new crude grade known as Utapate, a light and low-sulfur oil from the Niger Delta region. Its characteristics make it appealing to produce gasoline, and Spanish energy firm Repsol will receive the first export cargo. Meanwhile, in recent weeks, the Dangote refinery urged the Nigerian Upstream Petroleum Regulatory Commission to enforce the Domestic Crude Supply Obligation (DCSO), which requires crude oil producers to supply domestic refiners with a share of their output.
Oil output is forecast to increase from last year’s level in 2024, boosted by an improved security situation in the Niger Delta. Moreover, rising production 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. That said, 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, while further delays in petroleum production in Dangote’s refinery cloud the energy sector outlook as a whole.
Brendon Verster, economist at Oxford Economics, commented:
“New refined petroleum production, recovering domestic oil production, and elevated crude oil prices still support the hydrocarbon sector […] Still, crude oil theft and poor infrastructure stifle the sound functioning of the oil sector.”