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Why Oil Is Still Underpriced

Why Oil Is Still Underpriced

Oil prices are pulled in…

Nigeria’s Oil Output Plunges By More Than 200,000 Bpd In March

Nigeria Oil

Nigeria’s output of crude oil and condensate averaged 1.676 million bpd in March, down by more than 200,000 bpd compared to the February average production of 1.9 million bpd, Platts reported on Tuesday, citing Nigeria’s petroleum ministry as saying.

The Nigerian ministry has not provided an explanation for this sharp drop in output, but sources close to the matter have told Platts that the main reason for the decline was planned maintenance at the Bonga deepwater field whose output is somewhere between 150,000 bpd and 200,000 bpd.

Last month, Shell Nigeria said that the turnaround maintenance at the Bonga field began on March 4, and the plan was to successfully conclude the ramp of activities and resume production as planned in April.

The Bonga field maintenance is indeed the likely main cause of the lower Nigerian production last month, in the absence of any significant reports of oil infrastructure sabotages that could have explained force majeure loss of production.

Since the end of last year, Nigerian production has been gradually recovering as militant attacks have subsided, to the point that voices were raised that the country may have to join OPEC’s output cuts—from which it is currently exempt due to said militant violence—in case it manages to almost fully restore its production.

Still, one of Nigeria’s main export grades, Forcados—averaging around 250,000 bpd of output—is still under force majeure. Nigerian officials told Platts early last month that Forcados is expected to come online again sometime in the second quarter of this year.

Forcados is not among Nigeria’s export grades for May in the loading schedule that Reuters compiled last week.

For June this year, Nigeria’s Petroleum Minister Emmanuel Kachikwu has set a production goal of 1.9 million bpd of crude oil and another 300,000 bpd of condensates, for a total 2.2 million bpd output.

Related: Why An OPEC Deal Extension Won’t Lift Oil Prices

Referring to whether Nigeria may have to play along with OPEC’s output cuts (assuming that they are extended beyond June), Kachikwu said as early as the November 30 OPEC meeting, as quoted by Platts: “I will be very surprised that if I hit my 2.2 million b/d, I am not called upon to do my contribution [to the OPEC cuts]”.

By Tsvetana Paraskova for Oilprice.com

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