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Nigeria Suffers Production Decline as Rig Count Dips to Six

-By Fred Ojiegbe

Nigeria’s rig count dipped to six in January, as against seven in December 2020, raising fears of potential oil production decline within the period, latest data from the Organisation of Petroleum Exporting Countries, OPEC showed.

The OPEC data also showed that rig count of OPEC members increased by five as it showed a figure of 323 in January, as against 318 last December, while world rig count showed an impressive plus 110, having posted a figure of 1,325 in January as against 1,215, the month before. Among the 13 OPEC members, Saudi Arabia led the pack of gainers with an increase of three, having recorded 62 in January as against 59 recorded last December. It was followed by Iraq which had plus two, having recorded 32 as against 30 recorded within the period under review. The United Arab Emirate (UAE) also had an increase of two, having recorded 42, as against 40 recorded within the period under review.  Angola had plus one, as it recorded four, as against three recorded within the period under review.  Kuwait also had an increase of one, having recorded 29 as against 28 recorded within the period under review. Algeria led the loser’s group as its rig count declined by three having posted a figure of 19 in January, as against 22 posted the previous month. Six OPEC members had their rig count unchanged within the period under review. Congo, Equatorial Guinea, Gabon, Iran, Libya and Venezuela recorded 0, 1, 0, 117, 11 and 0, respectively. The United States had an impressive rig count of 33, having recorded 374 in January, as against 341 recorded the previous month. Canada also had a magnificent rig count of 65, as it recorded 156, as against 91 recorded the previous month.

Balance of supply and demand in 2021

The OPEC data also stated that demand for OPEC crude in 2021 has been revised up by 0.3 million barrels daily, mb/d from the previous month to stand at 27.5 mb/d. This is 5.0 mb/d higher than in 2020. Demand for OPEC crude in first quarter, 1Q21 has been revised down by 1.1 mb/d, while second quarter, 2Q21 has been revised up by 0.4 mb/d from the previous month. For third quarter, 3Q21 and fourth quarter, 4Q21, demand for OPEC crude has been revised up by 1.1 mb/d and 1.0 mb/d, respectively, from the previous monthly assessment. When compared to the same quarters in 2020, demand for OPEC crude in 1Q21 and 2Q21 is forecast to be 4.5 mb/d and 11.2 mb/d higher, respectively. The 3Q21 is projected to show an increase of 3.4 mb/d, year-on-year, y-o-y and the 4Q21 is expected to be higher by 1.0 mb/d y-o-y.

World oil demand

The OPEC report also showed that the contraction in global oil demand for 2020 was revised marginally down by 0.03 mb/d, as better-than expected oil demand data from India in 4Q20 largely offset weaker-than-expected consumption in Organisation for Economic Co-operation and Development, OECD Americas. Oil demand is estimated to have declined by 9.7 mb/d y-o-y in 2020, to average 90.3 mb/d. In the OECD, demand contraction in 2020 was revised up by more than 0.1 mb/d compared to last month’s projection, to show a drop of around 5.7 mb/d. In the non-OECD, the demand decline was revised lower, m-o-m, by more than 0.1 mb/d leading to an estimated drop of around 4.1 mb/d. For 2021, positive developments were evident across major economies, specifically in the US, supporting demand for petroleum products, particularly industrial fuels. The majority of this positive economic impact is assumed to gain traction during 2H21.

However, this positive outlook was counterbalanced by expectations for a weaker recovery in transportation fuels in the first half, 1H21. COVID-19 infection cases remain high in regions such as the US, Europe and Latin America, which has led to governments imposing new lockdown measures, or deepening existing ones, to help control the spread of the virus. Additionally, a slower rollout of vaccinations is assumed to further delay herd immunity targets in some countries and regions, and the appearance of new variants in many countries has also added to the uncertainties. Nevertheless, stronger growth is anticipated from transportation fuels in the second half, 2H21, based on the assumption that vaccination programmes will help stem the spread of COVID-19 and that the announced massive stimulus programmes will have a positive impact. As a result, OECD oil demand is forecast to grow by 2.5 mb/d in 2021. In the non-OECD region, oil demand for the year is estimated to increase by 3.3 mb/d y-o-y, supported by a rebound in economic activities in the main economies, particularly China, India and Other Asia. Consequently, world oil demand growth in 2021 is revised lower by 0.1 mb/d to 5.8 mb/d year-on-year.