Energy
Crude oil supply is tightening, expect higher prices – Analysts
By Akinyemi Precious
According to a report by yesterday, Crude oil supplies across the world are falling as demand outpaces supply.
The gap between supply and demand could be attributed to the supply cuts by the Organization of Petroleum Exporting Countries (OPEC), particularly that of major producer, Saudi Arabia.
The International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC) had earlier projected that oil demand will outpace supply this year, leading to overall inventory draws to the tune of 400,000 to 500,000 barrels per day (bpd), mostly accounted for by the second half of the year (2023).
Analysts believe that the disparity between demand and supply will lead to increased oil prices.
“It appears that the voluntary cuts announced by eight OPEC+ countries in April plus the additional 1 million bpd of unilateral Saudi cut that just started in July are having the desired effect, with sour barrels becoming more scarce.”
It is worthy of note that earlier this month, Secretary general of the International Energy Forum (IEF) , Joseph McMonigle had said that crude oil demand bounced back to pre-Covid levels quickly, but supply is having a tougher time catching up.
He said, “So, for the second half of this year, we are going to have serious problems with supply keeping up, and as a result, you are going to see prices respond to that.”
It is important to note, however, that Brent crude price as of 6:45 am (GMT+1) was $84.40 per barrel.
He also stated that a rise in driving and flying activities this summer has put a strain on supplies as refineries are struggling to cope.
Meanwhile, there was also a drop in Russian crude supplies in July 2023. When demand outweighs supply, prices will rise, and analysts expect that the recent rise in crude oil will extend even further.
If crude oil prices rise on the global market, it means two things for the Nigerian market:
Increased oil revenues are needed as the country plans to roll out intervention schemes to cushion the effect of the fuel subsidy removal on the country’s citizens.
In a prior announcement, the government has made it known that among other plans, it is focused on mass transportation, and alternative energy sources like compressed natural gas as well as reducing the impact of transportation costs as intervention schemes.
An increase in the cost of fuel will be unavoidable because the country has no refining capacity as citizens await the end of the current rehabilitation of the Port Harcourt, Warri and Kaduna refineries. So, as more fuel imports come into the country, facilitated by private companies, fuel pump prices could increase.
This also means that Nigerians need to increase their earnings, to survive a possible fuel pump price hike in the future.
Mr Tayo Aduloju, the Chief Executive Officer (CEO), Nigerian Economic Summit Group (NESG), says with targeted approaches, Nigeria can still meet some of the Sustainable Development Goals (SDGs) indicators.
Aduloju said this on Friday in Abuja, at a news conference to announce the Policy Innovation Center’s (PIC) annual Gender and Inclusion Summit.
According to him, though Nigeria is not on course to meet the SDGs target set for 2030, there are few indicators it can reach because as there are 17 SDGs with 169 targets and indicators.
“I would say right now we are not on course to reach anyone, but we can still achieve some milestone going forward.
“For example, we can turn around birth registration in 12 months; there are a few other indicators that I think Nigeria can reach.
“We have recommended a mother and child compact between the Federal Government and the Minister of Health and Social Welfare seems willing to push it.
“This is because we think that if we met those ones, some of the SDGs will be met automatically,” he added.
According to Aduloju, there is a parallel relationship between multi-dimensional poverty and gender inequality, with countries performing poorly on the Global Gender Report also exhibiting high severe multi-dimensional poverty.
He said that multi-dimensional poverty encompasses deprivations in health, education and living standards.
“The World Bank points out significant gender disparities in labour participation in Nigeria, with about 65.5 per cent of men participating compared to around 52.1 per cent of women.
“The National Bureau of Statistics indicates that about two-thirds of Nigerians are multi-dimensionally poor, lacking income and basic amenities like healthcare, education, and clean cooking fuels,” he said.
He added that conflict, climate change, inflation, and increasing food prices were among the pathways contributing to the rise in high food insecurity and malnutrition rates.
He, however, said that the solution remains a collective effort by all stakeholders to tackle the issues as it could no longer be achieved by government alone.
On her part, the Executive Director, PIC, Mrs Osasuyi Dirisu, said that Nigeria was facing unprecedented times owing to a weak and non-inclusive economy, volatile macro-economic environment, security challenges and weak economic competitiveness.
She, however, said that addressing poverty in Nigeria could not be business as usual.
“Ending poverty and reducing inequality are part of the SDGs and a wide range of approaches have been identified to reduce poverty and inequities.
“To design effective poverty reduction programs, it is important to understand pathways to poverty, evidence based approaches that work and linkages to multi-sectorial inequities.
“We need to identify what works for poverty reduction in Nigeria and sustain the commitment to poverty reduction by intentionally designing and implementing contextually relevant solutions driven by a policy enabling environment,” Dirisu said.
Speaking about the summit, she said that it would hold from Sept. 4 to Sept. 5 with “Reimagining Gender-Inclusive Pathways and Partnerships for Poverty Reduction” as theme.
She said that the summit was expected to explore the impacts of multi-dimensional deprivations on health, education, livelihood, and living standards.
Conceptualised in 2022, the summit is an annual event to provide an inclusive platform to explore transformative ways to advance gender equity, inclusion and gender-responsive governance in Africa.
The 2024 summit is expected to leverage the collective power of government, development partners, civil society, academia, and the private sector, highlighting the importance of strategic partnerships for inclusive development.
PIC, an initiative of NESG is an institutionalised behavioural initiative in Africa supporting the delivery of better policies and innovative solutions for social impact.
Chevron Nigeria Ltd. has restated commitment to its partnership with Nigeria in ensuring safe, reliable, and efficient operations in the country.
Chevron’s General Manager, Policy, Government and Public Affairs, Mr Esimaje Brikinn, made this known in a statement on Friday.
Brikinn said also that the company remained committed to delivering affordable, reliable, ever cleaner energy supply that was critical to the development of the Nigerian economy.
“At Chevron, we believe oil and gas will remain a viable component of the energy mix.
“The company believes that the future of energy is lower carbon even as it continues to add incremental volumes to its oil production, and support gas development in a clean manner, “ he said.
The manager said that over the years, Chevron had encouraged the participation of Nigerian companies in the oil and gas industry.
He said that the company, working with the Nigerian Content Development and Monitoring Board, continued to foster competence and competitiveness among Nigerian indigenous contractors and suppliers.
According to him, the company does this by adopting the participatory-partnership model.
“Chevron Nigeria believes that by investing in local communities, we can create a sustainable future for all.
“Our local content strategy is focused on three key pillars: capacity building (training, mentoring among others), local procurement, and social investment (community development projects mainly in health, education and economic development), “ he said.
Recently , the company was awarded the Best Exhibitor award at the 2024 edition of the Nigerian Oil and Gas Energy Week conferences and exhibition held on July 3 in Abuja.
Nigeria’s debt to petrol traders has surpassed $6 billion, doubling since early April, as the state oil firm, Nigerian National Petroleum Corporation (NNPC), struggles to cover the gap between fixed pump prices and international fuel costs, according to six industry sources.
This is according to a report by Reuters on Thursday, which tracks data on international petrol prices.
Sources confirmed to the American media outlet that NNPC has capped the pump prices of petrol shortly after the removal of subsidy in May 29, 2023.
The cap on fuel prices has resulted in stability at the pump despite increases in international crude oil prices and the devaluation of the naira against the dollar.
This situation has led many to speculate that the government might have reinstated some form of petrol subsidy, given the discrepancy between market prices and the steady price of the commodity.
According to data from Reuters, NNPC began facing difficulties early this year when late gasoline payments exceeded $3 billion.
The company has yet to pay for some January imports, with traders stating that the late payments now amount to between $4 billion and $5 billion.
Under the terms of their contracts, NNPC is required to pay within 90 days of delivery.
“The only reason traders are putting up with it is the $250,000 a month (per cargo) for late payment compensation,” one industry source said.
At least two suppliers have already stopped participating in recent tenders after reaching their self-imposed debt exposure limits to Nigeria, the sources said.
This means they will not send more gasoline until they receive payments.
The tension to reconcile the international landing cost of petrol and the fixed price of N617 has deepened the debt of NNPC to the traders, the sources confirmed.
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