By Udeme Akpan

THE average price of Bonny Light, Nigeria’s premium oil grade, has dropped by 34.8 percent to $42.9 per barrel in the past 11 months of 2020, due mainly to the prolonged Coronavirus pandemic, drop in economic activities and oil demand.

The data obtained from the Organisation of Petroleum Exporting Countries, OPEC reports, showed that the average price of the oil grade, stood at $42.9 per barrel between January and November 2020, thus indicating a fall of 34.8 percent when compared to $65.8 per barrel, recorded in the corresponding period of 2019.

This also showed a huge difference of $22.9 per barrel when compared to the $65.8 per barrel recorded in the corresponding period of 2019, meaning that the nation did not earn much from oil during the period under review.

Demand, Supply

The organisation, stated: “World oil demand for 2020 is expected to decline by 9.77 mb/d, marginally lower than in last month’s assessment.

“Weaker-than-expected data from the Organization for Economic Co-operation and Development, OECD in the third quarter of 2020, Q3’20, mainly due to lower transportation fuel demand in the US and OECD Europe, led to a downward revision of around 0.18 mb/d for the OECD group.

“For 2021, world oil demand growth is revised lower by 0.35 mb/d, to the growth of 5.90 mb/d. This is due to the uncertainty surrounding the impact of COVID-19 and the labour market on the OECD transportation fuel outlook for 1H21.

“Petrochemical feedstock and industrial fuels are forecast to gain momentum on the back of improving economic activities, with total oil demand projected to reach 96.89 mb/d in 2021.

“Non-OPEC supply for 2021 is adjusted down by 0.1 mb/d and is now forecast to grow by 0.85 mb/d to average 63.52 mb/d, mainly due to downward revisions in Russia’s output.

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“The US liquids supply forecast remains unchanged at 0.3 mb/d, while uncertainties persist. The main drivers for supply growth are expected to be the US, Canada, Brazil, and Norway.”

November report

Specifically, for November 2020, it stated: “Expectations that the Declaration of Cooperation participating countries would delay the planned easing of production adjustments from January 2021 further contributed to the improved outlook.

“Spot prices also rose on improving crude oil market fundamentals spurred by robust crude oil demand in the Asia Pacific, specifically China and India.

“Nonetheless, weak refining margins and increasing crude oil supply have limited prices. Furthermore, the rise of US crude oil stocks in November compared to late October levels, including in Cushing, Oklahoma, put downward pressure on crude prices.

“All physical crude oil benchmarks rose m-o-m in November, with North Sea Dated and Dubai first month increasing respectively by $2.53 and $2.63, or 6.3 percent and 6.5 percent, to settle at $42.54/b and $43.33/b.

“The WTI first month rose by $1.99, or 5.0 percent, to settle at $41.52/b. Despite a rapid recovery in Libyan crude oil supply, the value of light and medium crude differentials strengthened in the Atlantic on firm crude demand from China and India, which mopped up available cargoes in the West African, Mediterranean and the US Gulf Coast markets.

“West African crude differentials strengthened further due to the temporary absence of some Brass River volume due to pipeline explosions.

“The value of Azeri Light and Bonny Light crude differentials rose in November by 81¢ and 61¢ respectively on monthly basis, to settle at a premium of $1.06/b and 61¢/b, respectively.”

Current price

However, a survey of the global oil market, showed that the price of Bonny Light stood at $50 per barrel yesterday, indicating $10 in excess of the 2021 budget reference price of $40 per barrel.

But there was growing uncertainty over oil price and Nigeria’s oil income, especially because of issues that have to do with pipeline vandalism, oil theft and illegal refining.

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For instance, Shell Petroleum Development Company, SPDC, the leading International Oil Company, IOC, has recorded 140 oil spill incidents in the first 11 months (January – November) of 2020, representing 59 percent increase when compared to 88 oil spill incidents recorded in the corresponding period of 2019, according to the company report obtained by Energy Vanguard.

The company, which is the operator of a joint venture between the government-owned Nigerian National Petroleum Corporation – NNPC (55 percent), Shell (30 percent), Total (10 percent), and Agip (5 percent), stated that most of the incidents were caused by sabotage.


In a telephone interview with Energy Vanguard, weekend, the President, Oil and Gas Service Providers Association of Nigeria, OGSPAN, Mazi Colman Obasi, said: “The past and present administrations have said a lot about the need to diversify Nigeria’s economic base, but only very few successes have been achieved over the years. This means that we have to do more, moving forward in order to make it a reality.”

In another interview, the Lead Promoter, EnergyHub Nigeria, Dr. Amieyeofori Felix, also said: “Nigeria’s economy remains very fragile, apparently because it is dependent on oil and gas revenues.

“In other words, the nation’s ability to generate an adequate foreign exchange has been affected because of its over-dependence on oil. The situation might not change soon.

“In fact, the 2021 budget is already sitting on the deficit to be funded through additional borrowing, and given our high debt service to revenue, the low crude price and lower output will definitely affect the revenue we retain after debt servicing, and because we cannot afford to remain in the black hole, the government will resort to additional borrowing to fund it’s budget and development activities.

“The government must focus on expanding the revenue base so as to bring in more money outside of oil and gas. They must work on electricity to power the economy.

“They must also focus on how to curb the security challenges in the northern part of the nation in order to enhance economic activities, including petroleum exploration and agriculture.

“They have to also increase their tax net to bring many tax evaders as Nigeria has one of the lowest taxes to gap ratio in Sub-Sahara Africa.”

President Buhari

However, President Muhammadu Buhari, had said: “The 2021 Appropriation Bill is designed to further deliver on the goals of our Economic Sustainability Plan.

“This Plan provides a clear road map for our post- Coronavirus economic recovery as a transition plan to take us from the Economic Recovery and Growth Plan (2017 – 2020) to the successor Medium-Term National Development Plan (2021 – 2025).

“In view of the many challenges confronting us, we must accelerate our economic recovery process, promote social inclusion, and strengthen the resilience of the economy.

“The 2021 Appropriation has, therefore, been themed the ‘Budget of Economic Recovery and Resilience’.

It is expected to accelerate the pace of our economic recovery, promote economic diversification, enhance competitiveness, and ensure social inclusion.”

Vanguard News Nigeria

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Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.