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OPEC output slides on lower production in Nigeria, others


Opec HQ //Photo: Wikimedia

Opec HQ //Photo: Wikimedia

Output from the Organisation of Petroleum Exporting Countries (OPEC), was down by 0.06 million barrels per day (mbpd) last month, against the production level in the previous month, to achieve 26.70 mbpd during the period under review.

The production figure for February did not however include output from Iraq.

Based on the fundamentals in the market, the cartel projected that currency volatility may continue to assail economies around the globe, especially with growth projections in major emerging oil producing countries.

According to the cartel, crude oil output decreased mostly from Iraq, Nigeria and Libya, while production showed increases in Saudi Arabia and Kuwait.

Specifically, Nigeria’s crude oil production decreased by 65,000 barrels per day in February from the 1.9 million bpd it recorded in the previous month to 1.8 bpd in the month under review.

The report stated that the sharp rise of the US dollar versus all its major currency counterparts came to a halt with mixed results on average in February. The US dollar gained 2.2 per cent compared to the euro, but was about flat compared to the yen.

Already, importers of petroleum products are finding it difficult to import due to the devaluation of the naira in the country.
The Central Bank of Nigeria banned commercial banks from re-selling dollars to other banks, which also caused the bank to scrap its window of direct sale of foreign exchange to end users.

It fell 1.2 per cent versus the pound sterling, but lost only 0.6 per cent compared to the Swiss franc. The appreciating trend versus the euro continued in March. While, on average, the exchange rate to the euro stood at $1.1346/€ in February, it reached around $1.06/€ in March. The Russian ruble continued declining versus the US dollar in February, but at a more moderate rate of 4.8 per cent. Also, the Brazilian real continued depreciating by 6.9 per cent, on average, in February.

OPEC left its forecast for non-OPEC supply this year unchanged and said output of U.S. “tight” oil, also known as shale, might only start to be curbed towards the end of the year.

“Tight crude producers are aware that typical oil wells in shale plays decline 60 per cent annually, and that losses can only be recouped by drilling new wells,” OPEC said.

“As drilling subsides due to high costs and a potentially sustained low oil price, a drop in production can be expected to follow, possibly by late 2015.”

“While many challenges remain, the expected improvement in the global economy will also result in higher oil demand growth of 1.2 million barrels per day, above last year’s increase of 1.0 million barrels per day,” the OPEC report said.

“Given that the bulk of the increment will be coming from the emerging economies, any positive developments in these countries can add to oil demand growth,” it added.

The estimate for world oil demand growth in 2014 remains broadly in line with the previous report at 0.96 mbpd. For 2015, global oil demand growth is expected to average 1.17 mbpd, relatively unchanged from the previous month. Almost half of 2015 oil demand growth is projected to come from China and the Middle East.

Non-OPEC oil supply growth in 2014 is now expected at 2.04 mbpd, following an upward revision of 0.05 mbpd from the last report, mostly due to stronger-than-expected growth in fourth quarter of 2015. In 2015, non-OPEC oil supply is projected to grow by 0.85 mbpd, unchanged fromthe previous assessment. OPEC NGLs in 2015 are forecast to grow by 0.19 mbpd. In February, OPEC crude production declined by 0.14 mbpd to 30.02 mbpd, according to secondary sources.

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