Page 4 - AfrOil Week 16 2020

AfrOil COMMENTARY AfrOil
Nigeria does not have enough onshore storage capacity to cope with the oil supply glut (Photo: Offshore Technology)
Oil market’s woes ensnare Nigeria
Demand destruction and inadequate storage are not new problems for Africa’s largest crude producer
WHAT:
The factors that drove WTI prices below zero have been at work in Nigeria for some time.
WHY:
Abuja is not earning enough to recoup costs or meet budget targets.
WHAT NEXT:
The country’s best option may be to work harder to adhere to OPEC production quotas.
WORLD oil markets started the week on a grimly memorable note. On Monday, WTI prices not only dropped below zero for the first time in history but plummeted all the way down to about -$40.00 per barrel. They recovered some ground on Tuesday but did venture into negative territory again.
The downward plunge seems to have been driven partly by non-fundamental factors – namely, the imminent expiration of the front- month futures contract and, according to some reports, technical activity by traders. But there certainly were fundamental factors at work – chiefly, ongoing demand destruction stemming from the coronavirus pandemic, signs that Saudi Arabia intends to continue pumping oil at top speed until the new OPEC+ agreement takes effect on May 1 and full inventories that leave
many producers with nowhere to store their crude.
And it was these fundamentals that ended up driving oil prices on April 20, draining the mar- ket of any optimism left over from the unveiling of the new OPEC+ agreement on April 12.
Unrelenting pressure
Sadly, this is not exactly a novel situation for Nigeria. Africa’s largest crude oil producer has been feeling the pinch for some time, watching its unsold cargoes piling up in port for want of buyers.
Just over a month ago, for example, it found
itself in the position of seeking ways to unload
no less than 50 cargoes, including 35 April-load-
ing shipments and 15 more left over from its March programme. 
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w w w . N E W S B A S E . c o m Week 16 22•April•2020