Oil Market: Bonny Light price drops to $66.20 per barrel as IEA presents negative report
By Udeme Akpan
THE price of Nigeria’s Bonny Light, which had risen to over $71 per barrel after the recent meeting of the Organisation of Petroleum Exporting Countries, OPEC, and Non-OPEC members, Thursday, dropped to $66.20 per barrel, mainly because of the negative International Energy Agency’s report.
In the report released, Wednesday, obtained by Vanguard, the agency had stated that the volatile market was still affected by commercial stocks of crudes, a development, which culminated in negative speculation, and the unprecedented crash in the prices of crudes, including Brent from $72.70 to 463.05 per barrel.
However, at the current $66.20 per barrel, Nigeria still records an excess of $26.20 as its 2021 budget was based on $40 per barrel, and 1.8 million barrels per day, BPD, including Condensate.
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Nevertheless, the agency report further, stated: “For the world’s oil demand to peak anytime soon, significant action is needed immediately to improve fuel efficiency standards, boost electric vehicle sales and curb oil use in the power sector.
“Those actions – combined with increased teleworking, greater recycling, and reduced business travel – could reduce oil use by as much as 5.6 mb/d by 2026, which would mean that global oil demand never gets back to where it was before the pandemic. Asia will continue to dominate growth in global oil demand, accounting for 90% of the increase between 2019 and 2026 in the IEA report’s base case. By contrast, demand in many advanced economies, where vehicle ownership and oil use per capita are much higher, is not expected to return to pre-crisis levels.”
However, at its recent meeting, OPEC, which took major decisions to achieve market stability, had commended Saudi Arabia for the extension of the additional voluntary adjustments of 1 mb/d for the month of April 2021, exemplifying its leadership, and demonstrating its flexible and pre-emptive approach.
According to OPEC, “The Ministers approved a continuation of the production levels of March for the month of April, with the exception of Russia and Kazakhstan, which will be allowed to increase production by 130 and 20 thousand barrels per day respectively, due to continued seasonal consumption patterns.
“The Meeting reviewed the monthly report prepared by the Joint Technical Committee (JTC), including the crude oil production data for the month of February.
“It welcomed the positive performance of participating countries. Overall conformity with the original decision was 103 per cent, reinforcing the trend of aggregate high conformity by participating countries.
“The Meeting noted that since the April 2020 meeting, OPEC and non-OPEC countries had withheld 2.3bn barrels of oil by end of January 2021, accelerating the oil market rebalancing.
‘The Meeting extended special thanks to Nigeria for achieving full conformity in January 2021 and compensating its entire overproduced volumes.
“The ministers thanked HE Timipre Sylva, Minister of State for Petroleum Resources of Nigeria, for his shuttle diplomacy as Special Envoy of the JMMC to Congo, Equatorial Guinea, Gabon, and South Sudan to discuss matters pertaining to conformity levels with the voluntary production adjustments and compensation of over-produced volumes. In this regards the Ministers agreed to the request by several countries, which have not yet completed their compensation, for an extension of the compensation period until the end of July 2021.
“It urged all participants to achieve full conformity and make up for previous compensation shortfalls, to reach the objective of market rebalancing and avoid undue delay in the process. The Meeting observed that in December, stocks in OECD countries had fallen for the fifth consecutive month.”
It also added: “The Meeting recognized the recent improvement in the market sentiment by the acceptance and the rollout of vaccine programs and additional stimulus packages in key economies, but cautioned all participating countries to remain vigilant and flexible given the uncertain market conditions, and to remain on the course which had been voluntarily decided and which had hitherto reaped rewards.”
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