Saudi Arabia's Price Increase Could Indicate Oil Price Floor
Oil has been truly black gold for countries such as Nigeria and Angola-Africa's top oil exporters. It has sustained their economies, accounting for over 90 percent of exports and significant portions of GDP. Yet now this treasure trove has turned into a real headache, largely because of the shale oil and gas boom in the U.S., and of course, the global oil price rout.
Before the shale revolution, Nigeria was exporting around a million barrels daily to the U.S., peaking at 1.3 million bpd in 2006. In July 2014, no Nigerian oil entered the U.S. and the average daily for the year was 58,000 bpd - a minuscule amount compared with the 983,000 bpd from 2010, according to figures from EIA. Last year, Nigerian oil exports to the U.S. averaged 57,000 bpd.
For Angola, the decrease was a bit more moderate, from 383,000 bpd in 2010 to 124,000 bpd in 2015, but it still had grim consequences for the economy, seeing as the U.S. was Angola's second-biggest exports destination in 2014, after China and before India.
Angola and Nigeria didn't just lose a huge export revenue stream with the shale boom, though. They also suffered some of the harshest consequences of the consequent global oversupply that brought oil prices to multi-year lows.
Because of their over-reliance on oil, African oil producers as a whole had no mechanisms in place to counteract the effects of the slump. In Angola, for instance, 60,000 jobs have been lost in the past 12 months alone, because of the price slump. The country is currently negotiating with the IMF on a new loan to help prop up its finances and hoping that the rebound in crude will continue.
Nigeria, for its part, has had to deal with a corruption scandal in its state oil company and intensified terrorist activity in the heart of its oil industry - the Niger Delta - on top of lower oil prices. The latest figures released by the government showed that the income from oil and gas was down by over a third on both an annual and a quarterly basis in the first quarter of 2016. Related: Oil Rallies With Risk-On Rebound
The two biggest markets for Nigerian and Angolan crude are India and China. Yet, competition for these markets is getting increasingly stiffer, what with the U.S. energy self-sufficiency and no shortage of exporters desperate to get some money-any money-for their crude.
Like most of Africa, Nigeria and Angola, as well as smaller local oil producers, are suffering from the so-called resource curse that has seen African nations-endowed with some of the world's largest reserves of minerals, oil, and gas-struggle to survive. The root of the problem seems to be the lack of relevant expertise that would help these countries manage their natural riches in an effective way.
For the oil producers specifically, it's the over-reliance on a single commodity as a source of government revenue that has sealed their fate, at least for now. Venezuela's current drama has become-or should become-a cautionary tale for other small countries that depend on oil revenues.
While it's true that it's easier to talk about economic diversification than to make it happen, there seems to be no other viable alternative for Africa's biggest oil producers.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More