Crude oil price hits $88 per barrel, highest price since Oct 2014

Oredola Adeola

The price of physical crude oil hit a fresh seven-year high at over $88 per barrel early on Wednesday, being the highest price for the crude grades since October 2014, this according to market survey, is as a result of tight physical demand for crude oil by traders and refiners who are selling and buying cargoes across the world.

As at noon of Wednesday, January 19, 2022, Brent, Nigeria’s benchmark, was traded for $88.17 per barrel, while Bonny Light was traded for $88.24 pd, West Texas Intermediate (WTI) was traded for $86.25 pb.

According to a report seen by EnergyDay, physical demand for oil is tight across the world, as crude oil grades from the Nigeria and other African countries, United States, the North Sea, the Middle East, and Russia have seen a significant increase in their prices in recent weeks.

The report further suggested that major driver of the market price was the tight supply on the market, with physical cargo prices rallying, outages in major producing countries, and demand resilient to the Omicron wave.

Another factor that shifted the price was credited to the heightened geopolitical tensions in the Middle East and the Russia-West standoff over Ukraine.

The report stated that oil traders and refiners, especially the refiners from Asia, have rallied strongly and are back on the market buying cargoes much more than they did at the end of November and early December when the impact of Omicron was still a very large looming threat. They believed that the feared threat to demand from the new variant was overblown.


OPEC+ struggles to ramp up output

OPEC and its allies, OPEC+’s have been struggling to ramp up production output at 400,000 bpd.

For December, the smaller OPEC group managed to increase output by just 70,000 bpd up from November, quite shy of the 253,000 bpd that was its share of the 400,000 bpd hike that OPEC+ agreed to.

Meanwhile, the price of crude grades from West Africa have also jumped amid low Libyan supply in recent weeks.

Despite this development Nigeria, Libya, Angola, Gabon, Equatorial Guinea – Africa’s biggest oil producers have consistently failed for months to meet their OPEC allocation.Libya that has displaced Angola as Africa’s second-largest oil producer is also having production challenges embroiled in some turmoil.



The recent data obtained by EnergyDay via Central Bank of Nigeria(CBN) website revealed that the country’s crude grades were traded for $88.69 per barrel as at January 14, 2022, and $90.09 pd as at January 17, 2022.



According to OPEC Monthly Oil Market(MoM) report for January, 2022, OPEC NGLs and non-conventional liquids production in 2021 is unchanged from the previous
assessment to show growth of 0.1 mb/d y-o-y for an average of 5.1 mb/d. Growth of 0.1 mb/d y-o-y is forecast in 2022 for an average of 5.3 mb/d.

OPEC-13 crude oil production in December increased by 0.17 mb/d m-o-m to average 2 7.88 mb/d, according to available secondary sources.

Non-OPEC supply growth for 2022 also remains broadly unchanged at 3.0 million barrel per day year-on-year, to average 66.7 mb/d. Upward revisions to the supply forecast of Other Asia were offset by downward revisions in other Eurasia. The main drivers of liquids supply growth are expected to be the US, Russia, Brazil.

Nigeria has experienced a drop in crude oil production over the last three months, failing to meet the 1.6mbpd cap placed on it by OPEC. The country is battling with production drop due to outage at the Trans Forcados terminal, a major export hub for Nigeria, downtime on major pipelines, crude oil theft and several operational challenges leading to production capacity constraints in the assets.

Under the OPEC’s production agreement, Nigeria is expected to produce 1.66 million barrels a day of crude. In the 2022 budget, the country’s crude output stands at 1.88 million barrels per day (bpd) despite the quota from OPEC.



According to the OPEC Monthly oil Market(MoM) report for January, 2022, recently released statistics from the Central Bank of Nigeria (CBN), t he country’s current account
registered its highest surplus since early 2018, amid a strong trade position.

In the third quarter (Q3) 2021, the current account posted a surplus of US$3.6 billion compared with US$348 million in Q2, 2021 and a shortfall of US$3.6billion in Q3, 2020.

OPEC claimed the improving oil prices, if continued, will support the country’s economic recovery, coupled with easing of the inflation rate, which marginally falls for the second month in a row to 15.4% from 15.9%, marking the lowest rate since November 2020, largely due to sustained moderation in food prices.

Meanwhile, Mele Kyari, group managing director of the Nigerian National Petroleum Corporation (NNPC), had recently expressed fear that rising prices of oil would be bad for Nigeria as its customers may likely look for alternatives to the commodity.

He said in a conversation in a recent interview with Bloomberg TV, that current distortion in the market could lead to an increase in oil prices. He hinged his argument for an increase in crude oil prices on the fact that the gas supply crisis will make energy consumers shift demand for oil which is likely to climb by one million barrels per day.

The NNPC GMD had assumed the comfort zone crude oil for Nigeria at $58-$60 per barrel, saying that for the NNPC, anything above $70-$80 will create major distortions in the projections of the corporation and add more difficulties to the company.

“But for us as a country, as prices go up, the burden of providing cheap fuel also increases and that’s a challenge for us but on a net basis, you know, the high prices, as long as it doesn’t exceed $70 to $80, it’s okay for us.”