By Udeme Akpan
THE price of Bonny Light, Nigeria’s premium oil grade, Thursday, further increased to $70.15 per barrel from $69.38 per barrel, recorded yesterday, as the just-concluded Organisation of Petroleum Exporting Countries, OPEC, and Non-OPEC Ministers meeting continues to impact the market.
Oil ministers, who attended the 17th OPEC and non-OPEC Ministerial Meeting, ONOMM, which held via videoconference, June 1, 2021, had among other things, stressed the importance of adhering to full conformity, and taking advantage of the extension of the compensation period until the end of September 2021, as requested by some underperforming countries.
Expectedly, the prices of crudes, especially Bonny Light started to rise, hitting $70.10 per barrel, thus indicating an excess of $30 per barrel as the nation’s 2021 budget was based on $40 per barrel and 1.86 million barrels, including Condensate.
However, in an interview with Vanguard, the Ghana National Petroleum Corporation (GNPC) Professorial Chair in Oil and Gas Economics and Management, Institute for Oil and Gas Studies, University of Cape Coast, Ghana, Prof. Omowumi Iledare, said: “Government should be commended for the conservative choice of the oil price in the budget. The current price projections, according to Energy Intelligence Agency, EIA and even OPEC, remain more likely than not to stay within $50 – 60 in a sustainable way, other things being equal. That will certainly provide the buffer if the projected output of 1.86 fails to hold.
“The less than a certain component of the oil revenue projection for the budget is the production estimate. This is not because there will be no global oil demand growth that outperforms supply growth, but Nigeria’s production capacity to supply 1.86 is suspect and making this less likely than not. The plausible reasons are insecurity of assets, political uncertainty, and autocratic governance of the sector with not much room for diversity of opinions.”
He added: Well, I do not have a crystal ball; my hope is that a diversified budget independent of sources outside the control of the Federal Government needs to be the cornerstone of the Nigerian budget process. It is a tough call certainly under the circumstance.”
However, in a statement obtained by Vanguard, OPEC had, stated: “The Meeting noted the ongoing strengthening of market fundamentals, with oil demand showing clear signs of improvement and OECD stocks falling as the economic recovery continued in most parts of the world as vaccination programmes accelerated. The Meeting welcomed the positive performance of Participating Countries in the Declaration of Cooperation (DoC). Overall conformity to the production adjustments was 114% in April (including Mexico), reinforcing the trend of high conformity by Participating Countries.”
“In view of current oil market fundamentals and the consensus on its outlook, the Meeting reaffirmed the existing commitment of the participating countries in the DoC to a stable market in the mutual interest of producing nations; the efficient, economic, and secure supply to consumers; and a fair return on invested capital. Reconfirmed the existing commitment of the 10th OPEC and non-OPEC Ministerial Meeting in April 2020, amended in June, September, and December 2020, as well as in January and April 2021 to gradually return 2 million barrels a day (mb/d) of the adjustments to the market, with the pace being determined according to market conditions.
“Reiterated the critical importance of adhering to full conformity, and taking advantage of the extension of the compensation period until the end of September 2021, as requested by some underperforming countries. Compensation plans should be submitted in accordance with the statement of the 15th OPEC and non-OPEC Ministerial Meeting. Reconfirmed the decision made at the 15th OPEC and non-OPEC Ministerial Meeting with regards to production adjustments for the month of July 2021, given the observed market fundamentals.”
Nevertheless, in his remarks at the event, HE Mohammad Sanusi Barkindo, OPEC Secretary General, had said: “The projections for oil are largely unchanged from our last meeting, with demand expected to grow by 6 mb/d to around 96.5 mb/d on average for the year, an increase of 6.6%. As with the economy, the market outlook for later this year looks especially promising. In fact, we anticipate that demand will surpass 99 mb/d in the fourth quarter, which would put us back in the range of pre-pandemic levels.
“Overall, demand in countries outside the OECD should rise by nearly 6.8%, or 3.3 mb/d, this year, and by almost 6.4%, or 2.7 mb/d, in the OECD. This is a welcome turn of events from the sombre situation we experienced in 2020.
“Here, I would caution that this is no time for complacency. As we know from experience over the past year, COVID-19 is a persistent and unpredictable foe, and vicious mutations remain a threat to both human health and recovery. Furthermore, many leading economies are pumped up by record levels of fiscal and monetary stimulus, debt levels have soared, and inflation is beginning to rear its ugly head in some countries.
“We are also monitoring the Joint Comprehensive Plan of Action talks that are taking place here in Vienna. IR Iran is a Founder and an extremely important and valued member of OPEC. We anticipate that the expected return of Iranian production and exports will occur in an orderly and transparent fashion, thereby maintaining the relative stability that we have worked hard to achieve since April of last year.”
He added: “Turning to the supply side, non-OPEC liquids production is now forecast to grow at a slightly slower pace than we expected last month, rising by around 700,000 b/d in 2021 to an average of 63.6 mb/d. In the US, liquids production is expected to dip slightly, to around 17.6 mb/d, despite the improving market conditions and demand prospects. Both conventional and tight crude production is forecast to decline in the US, while NGLs and biofuel output are expected to rise. In contrast to the US, liquids production is expected to grow in Canada, Brazil, China, and Norway.”