Oil production cut: Oil prices reach $80 per barrel 

Nigeria’s production disruptions as well as in two other countries have caused supply hiccups in the oil market prompting prices to extend gains on Tuesday.

Brent crude traded near $80 a barrel despite the rapid spread of the Omicron coronavirus variant, supported by supply outages and expectations that U.S. inventories fell last week.

Brent crude rose by 55 cents, or 0.7 per cent to $79.15 a barrel after hitting a session high of $79.85. U.S. West Texas Intermediate (WTI) crude rose 73 cents, or 1 per cent to $76.30, after rising to $76.92.

Both contracts reportedly traded at their highest in a month.

“Support comes as well from high aggregated production disruptions in Ecuador, Libya and Nigeria and the expectation of another large drop in U.S. crude inventories,” said UBS oil analyst Giovanni Staunovo.

It was recently reported that about 200,000 barrels of crude oil is currently stranded as oil major Shell Plc halted crude shipments from Nigeria’s Forcados export terminal.

The action is considered another blow to Nigeria which has struggled to stem falling production.

Shell Petroleum Development Co. of Nigeria Ltd. issued a notice of force majeure on Forcados shipments, effective from midday on December 21, and plans to issue a revised offtake program in due course.

More than 200,000 barrels a day of Nigerian crude normally pass through the terminal.

The shutdown comes just a month after Shell said it was restoring flows from the nearby Bonny facility. Force majeure is a clause that allows companies to skip contractual obligations following issues outside of their control.

The stoppage occurred during replacement of one of the two single point moorings at Forcados, with the positioning of a jack-up barge preventing tanker access, export operations and resumption of full production into the terminal, Nigerian National Petroleum Corp. said in a notice.

The presence of the jack-up offshore support vessel Seacor Strength at the Forcados moorings was confirmed by ship tracking data monitored by Bloomberg.

Neither the Nigerian National Petroleum Corporation, Limited,  NNPC nor Shell gave an indication of the likely duration of the stoppage. The force majeure suggests it will be long enough to affect four remaining cargoes due to be loaded this month.

Since Shell announced the month-long force majeure at the Bonny site in October, only one ship has loaded a cargo from that terminal.

Presently, Nigeria, Libya and Ecuador have declared force majeures this month on part of their oil production because of maintenance issues and oilfield shutdowns.

Meanwhile, a preliminary Reuters poll showed on Monday that U.S. crude oil inventories are likely to have dropped for the fifth week in a row, while gasoline inventories were seen mostly unchanged last week.

England will not face any new COVID-19 restrictions before the end of 2021, British health minister Sajid Javid said on Monday, as the government awaits more evidence on whether the health service can cope with high infection rates.

U.S. President Joe Biden, meanwhile, pledged to ease a shortage of COVID-19 tests as the Omicron variant threatens to overwhelm hospitals and stifle travel plans.

Omicron-induced staff shortages led to thousands of flights cancellations over the Christmas weekend in the United States.

China’s symptomatic coronavirus cases rose for a fourth consecutive day on Monday, with Xian reporting more infections in a flare-up that has put the city’s 13 million residents under lockdown.

Investors are awaiting an OPEC+ meeting on Jan. 4, at which the alliance will decide whether to go ahead with a planned production increase of 400,000 barrels per day in February.

At its last meeting, OPEC+ stuck to its plans to boost output for January despite Omicron.

Russia is unlikely to hit its May target of pre-pandemic oil output levels due to a lack of spare production capacity but could do so later in the year, analysts and company sources said on Tuesday.

Money managers raised their net long U.S. crude futures and options positions in the week to December 21, the U.S. Commodity Futures Trading Commission said on Monday.

The speculator group raised its combined futures and options position in New York and London by 4,634 contracts to 259,093 during the period.

Meanwhile, Nigeria’s effort to meet its production quota recorded a 10 percentage points drop month on month to 239 per cent in November even as the country raised production slightly.

In overall the Organisation of Petroleum Exporting Countries, OPEC+ compliance with oil production cuts rose to 117 per cent in November from 116 per cent a month earlier, two sources from the group told Reuters, indicating production levels remain well below agreed targets.

Compliance from the 10 OPEC countries participating in the production cuts reached 122 per cent, with participating non-OPEC countries achieving 107 per cent, data showed.

The International Energy Agency (IEA) said in its December oil market report that OPEC+ missed its production targets by 650,000 barrels per day (bpd) last month, compared with 730,000 bpd in October.

The OPEC+ data shows West African producers Nigeria and Angola continued to struggle to pump at target with Angola’s compliance hitting its highest this year at nearly 300 per cent.

The two countries have failed to produce at targets in recent years due to underinvestment, persistent maintenance issues and an exodus of international energy companies.

Production of Russian oil and gas condensate, the latter being excluded from the deal, has been broadly stable in December versus November.

Russian Deputy Prime Minister Alexander Novak has said the country’s oil production will reach pre-pandemic levels by May 2022.