Nigeria’s crude wobble as inventories keep volatility high

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Selling above $75 dollar per barrel earlier this week, Nigeria’s Bonny Light crude yesterday, dropped to $68 per barrel on the backdrop of rising inventory by the American Petroleum Institute (API).

With a record $7 slide in less than two days, API had reported a build in crude oil inventories of 806,000 barrels for the week ending July 16, bringing the total 2021 crude draw to under 50 million barrels.

This follows a recent agreement by the Organisation of Oil Exporting Countries (OPEC) and its alliance to boost production monthly by 400, 000 barrels per day.

While Nigeria had set a budget benchmark of $57 per barrel for the 2022 budget, and higher crude oil production at 1.88 million barrels per day (bpd), the latest OPEC decision authorised the nation to produce 1.829 million barrels per day from 2022.

Although the price also remained within the ambit of the projected price benchmark for 2022, payment of subsidy continues to lay siege to revenue generation.

The Central Bank of Nigeria’s monthly report for January 2021 had shown a dismal revenue-earning profile. In the report, federally collected revenue fell 13 per cent year-on-year to N807.5bn and was five per cent below the budget benchmark.

On Wednesday afternoon, while Brent sold for about $71.89 per barrel, gaining about $4 from the $68 it was selling earlier in the week, WTI went up to $69.89 per barrel.

While a loss of 4.333 million barrels was projected for the week, API had reported a draw in oil inventories of 4.079 million barrels, largely in line with analyst predictions for a draw of 4.333 million barrels.

In the midst of the uncertainties, Shale producers, Nigeria’s main competitor, continue to increase output. Energy Information Administration had reported that U.S. oil production increased by 100,000 bpd to an average of 11.4 million bpd for the week ending July 9. It is the highest production level in over a year, Oilprice reported.

Gasoline inventories according to API would stand at 3.307-million barrels for the week ending July 16. It was only a 1.545-million-barrel draw in the previous wee.

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