Nigerian crude fell early this week as OPEC+ signals a modest production increase for November and northern Iraq resumed exports, causing concerns about a growing oversupply despite high prices.
Bonny Light traded near the $69 a barrel mark as oil prices dropped sharply at the beginning of the week.
Reports claim that the eight OPEC+ nations that voluntarily reduced their output may announce their next production increase for November, while exports from northern Iraq resumed over the weekend.
Consequently, the market anticipated that oil prices would experience considerable pressure throughout the upcoming year.
Although it is generally believed that OPEC+’s supply increases are an effort to reclaim market share, the group will feel more at ease knowing that the market can withstand more supply if the front end of the curve stays in backwardation.
However, as the global oil market enters a surplus environment, time spreads ought to face more pressure. The Nigerian National Petroleum Company (NNPC) will supply the Dangote Refinery with five crude cargoes each in September and October under a two-year extension agreement. This increases deliveries to 300,000 barrels per day to reduce Nigeria’s reliance on fuel imports.
Dangote plans to reduce Crude oil importation
The $20 billion refinery, which has been in operation since January 2024, is anticipated to cease importing crude by the end of the year and process up to 650,000 barrels per day at full capacity.
The NNPC stated that since October 2024, the supply of crude to the refinery owned by Africa’s richest man, Aliko Dangote, increased to 82 million barrels, with 60 per cent of those loads being in naira
Nigeria agreed last year to sell 445,000 barrels of crude per day to the Dangote refinery in real to reduce pressure on the currency and stabilise domestic pump prices.
The federal government says the deal is a pilot project that could be expanded to include other domestic refiners.
Higher Oil Supply weaken Crude Oil’s Bullish Outlook
West Texas Intermediate crude closed at $62.58 per barrel, down 1.38 per cent daily, 3.18 per cent every month, and 10.39 per cent on an annual basis. Oil prices marginally increased today despite a two-day selloff, indicating continued pressure from supply issues.
Late September has seen volatility in crude oil prices as the hydrocarbon dropped more than 3% due to signs of an increase in supply.
The WTI market has been range-bound between $61.87 and $65.4 a barrel over the past few weeks, with frequent tests of support and resistance levels. The convergence of the 100 and 200 SMA moving averages around $63.5 a barrel and $64 a barrel points to the possibility of consolidation or a breakout.
OPEC+ announced a 137,000 barrels per day (bpd) increase in production, with additional increases scheduled, denying rumours of more significant reductions.
Kurdistan’s pipeline restarts increased exports via Turkey by 150,000 to 160,000 barrels per day after a two to five-year pause. Russian crude shipments hit a 16-month high despite U.S. sanctions. Forecasts for 2025 indicate that global demand will grow by 1 to 4 million barrels per day, although conflicting signals are strong in some regions (e.g., strong demand for hikes is cited by Kuwait), but it is restrained by economic uncertainty.
Greater competition in Asia is also affecting the Organization of the Petroleum Exporting Countries and its allies, as the region receives relatively large amounts of oil from countries like the US. Oil traders believe there will likely be an excess of cargo as this month’s trading cycle ends due to the pressure this is placing on Middle Eastern prices.
It is anticipated that China will absorb some additional barrels of crude as part of its strategic reserves’ purchases, but refiner demand will likely be lower because of maintenance and the absence of import quotas set by Beijing.
The persistent bias toward draws in US gasoline inventories supports spot prices. Geopolitical and policy factors: Russian refineries were targeted by Ukrainian drones, which damaged exports and might have doubled strategic hits.
The Trump administration’s US policy prioritizes price reductions to reduce inflation; unless WTI falls below $50 a barrel, no action is anticipated.
