Oil refineries in China and India which are customers of Russia are turning to oil giants in the Middle East in fears that the latest U.S. sanctions on Moscow may create a supply gap.
Bloomberg reported that top oil-producing countries who are members of the Organisation of Petroleum Exporting Countries (OPEC) including the United Arab Emirates, Kuwait, and Iraq received fresh inquiries to potentially provide additional barrels in coming months.
Nairametrics observes that Nigeria, despite being the largest oil producer in Africa is being snubbed in this new trade development as the country struggles to up its oil output in over three years.
Nigeria’s crude oil output has maintained a downward curve in the last four years, dropping from an average of over 2 million barrels per day in 2019 to around an average of 1.5 million barrels in 2024.
Nigeria failed to meet its OPEC quota throughout 2022 and 2023 and struggled to meet its reduced quota of 1.5 million bpd in 2024.
While the Nigerian government has been boasting lately of increasing oil output to the tune of 1.8 million bpd, the latest data from the Nigerian Upstream Petroleum Regulatory Commission show that daily production of crude oil excluding condensates was an average of 1.484 million in 2024.
This shows that the country was still shy of its OPEC quota of 1.5 million bpd.
In the coming weeks, OPEC giants like the UAE, Saudi Arabia, Iraq, and Kuwait may benefit from the supply gap created by the latest sanction of Russia’s oil industry by the United States.
Bloomberg reported that India and China, “the growth engines of global oil markets, are scouring for alternatives”, as a prospect of tough U.S. sanctions on Iran also compounds the supply risks for them.
The report noted that the production surplus of the OPEC giants has helped cap a surge in oil futures, which have l slightly reduced since it soared above $81 a barrel on Monday.
What you should know
- OPEC has refused to approve an increase in production by members for months in its desperate attempt to stabilize global oil prices and prevent a global supply surplus.
- However, its allies (who make up OPEC+), particularly Russia refused to produce within their quotas, causing Saudi-led OPEC to struggle with controlling global oil prices.
- Crude traders have expressed optimism in OPEC+’s capability to stabilise markets and cover Russia’s losses to the sanctions.
