Page 6 - LatAmOil Week 01 2021

LatAmOil COMMENTARY LatAmOil

A long, strange year:

2020 in review

After dominating the year, concerns about OPEC+ production quotas
and fallout from the COVID-19 pandemic are spilling over into 2021

WORLD oil markets have never quite recovered facilities were almost completely full. As a result,
all of the ground they lost between mid-2014 prices plummeted even more than they might
WHAT: and early 2016, when prices for Brent crude and have done otherwise – and the rest of the year
The National Assembly West Texas Intermediate (WTI) plummeted was taken up by attempts to repair the damage.
has resumed its review of from levels above $110 per barrel to less than The clean-up campaign is not over. Never-
the PIB. $30 per barrel. But in 2020, traders discovered theless, NewsBase’s editors are marking the start
that there was more room for these two bench- of 2021 with a review of how each of the regions
WHY: marks to fall. covered by our organisation was affected by the
Without a new law in On April 20, WTI prices hit unprecedented events of the past 12 months.
place, Nigeria will have lows, sinking below zero for the first time in
difficulty maximising the history. (Brent, by contrast, hit a 19-year low Africa: Delays and disruption
potential of its oil and gas slightly below $20 per barrel on the same day.) Undoubtedly, Africa’s oil and gas sector has suf-
resources.
Prices did not stay at these levels for long, but fered over the last year.
WHAT NEXT: they have not regained all their strength either. Falling energy prices and weakening demand
As critiques emerge, the As of the beginning of 2021, both were trading caused export earnings to sink, and the decline
government still hopes near $50 per barrel, and some market observers imposed significant hardships on major pro-
to wrap up the legislative were speculating about the possibility of further ducers such as Nigeria and Angola, which are
process in March or April. declines, owing to disagreements over OPEC+ heavily dependent on oil export revenues. They
production curbs and new lockdowns to combat also left some of these producers with large vol-
the coronavirus (COVID-19) pandemic. umes of crude and LNG that they simply could
In the end, OPEC+ kept the quotas in place. not sell – and could not put into storage either,
But this speculation was hardly misplaced, given since they lacked the facilities to do so.
that the quotas and COVID-19 were the main Nigeria, for example, found itself stuck
reasons why 2020 wreaked such havoc on the repeatedly during the spring with dozens of
energy sector. The pandemic (and the public unsold oil cargoes, and its attempts to attract
health measures taken to combat it) caused oil buyers with price discounts did not always suc-
and gas consumption levels to plummet aston- ceed. Angola also experienced similar problems,
ishingly quickly in the first half of the year, though on a smaller scale.
even as they upended predictions about future At the same time, market conditions also
demand. affected major investment initiatives. Low
At the same time, the lapse of the OPEC+ prices, sluggish demand and lockdowns delayed
production agreement at the end of March led final investment decisions (FIDs) on several
Russia and Saudi Arabia to bring much more oil projects, including Eni’s Agogo field, located
to market in the hope of gaining more market offshore Angola. They also led some companies
share. (It also led other members of the group to to hand their African assets over to their part-
follow suit.) This rapid increase in supply took ners; for example, FAR Ltd (Australia) and Cairn
place at a time when very little surplus crude Energy (UK) both opted to quit the Sangomar
could be consigned to inventory, as most storage field offshore Senegal.

P6 www. NEWSBASE .com Week 01 07•January•2021