Oil soars to $40 as Nigeria cuts production to 1.613m b/d

Oil prices rose sharply yesterday, as Brent per barrel settled above $40 due to reported small crude oil inventory draw of 483,000 barrels for the week ending May 29.

Although analysts had predicted an inventory build of 3.038 million barrels, the lower draw also pushed Nigeria’s Brass River crude grade to $40.18, Qua Iboe settled at $40.18, while Bonny Light was trading at $37.89 per barrel in the early hours of yesterday.

American Petroleum Institute (API), had previously estimated a build in crude oil inventories of 8.731 million barrels, EIA’s estimates were according to Oilprice more muted, with the as the EIA reported last week that the inventories had climbed by 7.9 million barrels.

The API reported a build of 1.706 million barrels of gasoline for week ending May 29, compared to last week’s 1.120-barrel build. This week’s draw compares to analyst expectations for a 1.0 million-barrel build for the week.

Distillate inventories were up by 5.917 million barrels for the week, compared to last week’s 6.907-million-barrel build, while Cushing inventories saw a draw of 2.2 million barrels.

Meanwhile, State Minister of Petroleum Resources, Timipre Sylva, has said Nigeria fully implemented OPEC+ alliance in April 2020 to bring into effect the agreement to cut 9.7 mbd that would ameliorate the current situation caused by the Covid-19 pandemic.

“Based on current NNPC data, Nigeria reduced its current production in May 2020 to 1.613m b/a.  The difference between its reference productions of 1.829 with its May 2020 production figures is 216,000 b/d,” he said.

According to him, the development represents compliance of about 52 per cent as opposed to the 19 per cent reported by some international media.

“Pertinent to note is the figures reported by TR include Agbami and Akpo condensate streams which are classified as condensates and thus excluded for quota purposes. It is worthy to note that current daily crude oil production is well below the period commitment level of 1.412 million barrels per day and will translate to full compliance by end of June 2020,” Sylva stated.

He disclosed that Nigeria would continue to fully comply with the agreement and look forward to improving on its compliance levels for the lifespan of the cut.