Nigeria’s rig count drops further as OPEC leaves demand, GDP unchanged

Though Nigeria recorded an increase in production output last month following the lifting of force majeure on crude exports from Bonny Light terminal, the country’s rig count dropped further to seven from nine, partly due to crude oil spill in Nembe creek, Bayelsa State.

At the current level, Nigeria’s rig count is lower than the eight recorded one year ago. This is a change of -22.22 per cent from last month and -12.50 per cent from one year ago.

Despite the Federal Government’s readiness to pump more oil and increase its acreage, operational setbacks and sabotage from key pipelines continue to undermine optimal production.

Compared to 11 rigs recorded in September this year, the November count is at par with 2020 records and lower than 16 rigs recorded in 2019.

The Organization of the Petroleum Exporting Countries (OPEC’s) Monthly Oil Market Report (MOMR), published yesterday, showed that the country recorded 1.42mbpd according to secondary sources and 1.27mbpd based on direct communication to the cartel.

Though Nigeria is expected to produce 1.66 million barrels a day of crude under the new OPEC+ agreement for December, higher than the current 1.4 million barrels per day being recorded by the country, there are concerns that the country can attain the volume despite assurances by the Minister of State for Petroleum, Timipre Sylva.

Meanwhile, OPEC has revised higher the 2021 and 2022 forecast call as it increased oil demand expectations for both years, saying it expects the Covid-19 Omicron variant to have mild and short-lived effects.

The cartel also revised its forecast for 2021 global economic growth down to 5.5 per cent, however leaving the GDP growth outlook for next year at 4.2 per cent.

In its latest MOMR, OPEC pegged world oil demand at 96.63mn b/d this year and 100.79mn b/d next year, both around 200,000 b/d higher than its previous estimates. Growth levels are unchanged at 5.65mn b/d and 4.15mn b/d respectively because of past adjustments.

OPEC adjusted oil demand higher for the first half of this year on better-than-anticipated fuel consumption in Organisation for Economic Co-operation and Development (OECD) countries, and it reduced third-quarter estimates because of higher Covid-19 cases, softer industrial production in China and easing transport fuel recovery in India.

It adjusted fourth-quarter oil demand lower as a result of lockdown measures in Europe and the potential effects of the new Omicron variant. This shifts some of the expected recoveries from October-December to January-March, OPEC said. It has revised first-quarter demand higher by 1.11mn b/d compared with the previous estimate, to 99.13mn b/d.

While the pandemic remains “a key factor of uncertainty”, OPEC expects the effects of the new variant to be “mild and short-lived, as the world becomes better equipped to manage Covid-19 and its related challenges,” said.

Yesterday’s report kept its forecast for non-OPEC liquids supply growth this year largely unchanged at around 680,000 b/d, for an average 63.65mn b/d, and still sees this growing by 3mn b/d next year.

Investment remains a concern, OPEC noted, estimating around $350bn in the non-OPEC upstream sector in 2021 and in 2022 for a 50 per cent drop compared with 2014. OPEC said this limits growth potential.