Oil price Q1 gain raises revenue hope    

The cut in oil production measure put in place by the Organisation of Petroleum Exporting Countries (OPEC+) towards the end of last year may be yielding the desired results.  At the close of the first quarter of the year (Q1), the measure, coupled with an improving macroeconomic outlook, experts said, could bring the $90 per barrel sooner than assumed. This is why the experts are optimistic that this continued rise in oil price portends a greater inflow of revenue for the Federal Government to execute its budget for this fiscal year. The Brent Crude closed at the weekend at $87 per barrel and the West Texan Intermediate (WTI) at $83.17 per barrel. Nigeria’s 2024 budget  has a projected benchmark price of crude oil selling at $77.96, making for an excess of $9.04 per barrel at the close of the week- a difference that may further increase should crude oil hit the $90 mark being projected by the industry.

Still, the production output estimate in the budget 2024 is 1.78 million barrels of oil daily.This, experts said, is where the challenge lies for the country. For some time, the country’s oil production output has been epileptic. For instance, the excitement that the country inched closer to actualising her oil production output target of 1.8 million barrels per day recording 1.64 million bpd production output in January from a previous December 2023 output of 1.55mbpd, may have given rise to concerns given the February figure. Data on the website of the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) at the weekend indicated that there was a drop in the country’s production figure, which as at February ending stood at 1.54 mbpd (including crude oil, blended and unblended condensate).

A breakdown of this figure showed that crude oil production stood at 1.32mbpd; Blended Condensate was 55, 345 bpd and Unblended Condensate was 162, 056 bpd. It would be recalled that in statement, the NUPRC last month noted that in line with its mandate and effort to ensure transparency and accountability, released a three- year Regulatory-Action-Plan (RAP) for the country’s upstream oil and gas sector, which aims to raise oil, condensates output to 2.6 million bpd by 2026.

The Commission had said, then, that “the recent increase in oil production is a good indication that the Commission has begun the implementation of the RAP in earnest and that the action is yielding results. It is interesting to note that the January 2024 production is the highest since January 2022. This, therefore, is a good step towards meeting the 2024 budget target of 1.78 million bpd”.But the about 100, 000 bpd drop in production output between January and February may have further drifted the country away from the 1.78mbpd oil output benchmark in the budget. This is why experts are concerned that the country may not really be in a position to take advantage of the high international oil price the commodity offers.

International oil experts have, however, not seized to celebrate the gains being recorded by the commodity, especially as it has set the WTI oil futures on track for a first-quarter gain of nearly 14 per cent for the first time in three sessions and on track to tally a solid gain for the quarter and a third-straight monthly climb. This has been a “comeback quarter” for oil, said, a senior market analyst at The Price Futures Group, Phil Flynn, who described the Q1 as a “comeback quarter” for oil.

“The pessimism that permeated the oil prices when we entered this quarter seemed to dissipate as the hard realities of supply and demand didn’t fit the bearish narratives,” he told MarketWatch, adding that the talk of a recession and the possibility that the OPEC+ would not be able to follow through with its cuts proved to be false. Besides, Flynn argued that while geopolitical risk factors have “not led to any major disruptions in oil supplies, they definitely have added to the cost of transportation” and made it “more difficult to procure supplies”. With markets closed for Good Friday, oil was on track for quarterly gains. Brent was up 11.8 per cent over the first three months of the year through last week’s closure, while WTI gained 13.5 per cent.

Source: thenationonlineng.net