More Trouble for Nigeria as OPEC Cuts Oil Demand for 2021

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By Adedapo Adesanya

Nigeria, among other oil-producing nations, still faces a tighter oil revenue as the Organization of the Petroleum Exporting Countries (OPEC) October Month Oil Market Report (MOMR) revised demand lower by 80,000 barrels a day in 2021.

OPEC forecast growth of 6.5 million barrels a day, with the cut largely reflecting a lower growth outlook for both developed and emerging market regions compared to the September forecast.

World oil demand has been affected by the biting effect of the coronavirus pandemic, resulting in a market glut and an eventual crash in oil prices. Despite assurances that the worst is over for the commodity, demand worries still persist.

President Muhammadu Buhari presented the 2021 budget (appropriation bill) to the joint session of the National Assembly last Thursday and expects N7.78 trillion in revenue with oil production pegged at 1.86 million barrels per day, 3 per cent higher than 1.8 billion set for the year 2020.

But as a result of the pandemic, world economies, especially oil-dependent ones have been forced to either keep their oil in the ground or sell at lower-than-expected prices. The country put the oil benchmark at $40 per barrel.

OPEC, however, reiterated that by its estimate, world oil demand will decline by 9.5 million barrels per day year-on-year in 2020. The estimate is relatively unchanged from last month’s assessment, reaching a level of 90.3 million barrels per day.

Demand for OPEC crude in 2020 is revised down by 300,000 barrels per day from the previous month’s assessment to stand at 22.4 million barrels per day, around 7 million barrels per day lower than in 2019.

Similarly, demand for OPEC crude in 2021 is revised down by 200,000 barrels per day from the previous month’s assessment to stand at 27.9 million barrel per day, around 5.6 million barrels per day higher than in 2020.

On the supply side, OPEC revised up its forecast for 2020 output by 310,000 barrels a day, due largely to a stronger-than-expected recovery in United States’ production.

The price of OPEC basket of 13 crudes stood at $40.68 a barrel on Tuesday, October 13, compared with $40.57 the previous day, according to the latest OPEC Secretariat calculations released on Wednesday.

The OPEC Reference Basket of Crudes (ORB) is made up of the following: Saharan Blend (Algeria), Girassol (Angola), Djeno (Congo), Zafiro (Equatorial Guinea), Rabi Light (Gabon), Iran Heavy (Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Arab Light (Saudi Arabia), Murban (UAE) and Merey (Venezuela).

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