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12 December 2019

Organization of the Petroleum Exporting Countries (OPEC) has revised its outlook yet again and now forecasts that there will be a small deficit in global oil markets in 2020 and...



10 December 2019

Last week, the Organization of the Petroleum Exporting Countries (OPEC) and OPEC+ including Russia agreed to increase output cuts from 1.2 million barrels per day (bpd) to 1.7 million bpd...

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It has been reported that Nigeria has agreed to cut its  production of crude oil and condensates  in an effort to assist Saudi Arabia, the de facto leader of OPEC, with the Saudi Aramco's IPO. According to the Wall Street Journal Nigeria not only  agreed to the cut production and comply strictly with its OPEC quota but promised to use its influence  to push  other African members to follow suit in an attempt to increase global oil price benchmarks

Aramco launched its IPO plans on Sunday, and it is due to go public in December. Aramco's growth relies upon oil prices staying around $65 a barrel, according to a document prepared for investors seen by the Journal.

OPEC is a group of 14 oil-producing nations, which produce about 30% of the world's oil. Its African members include Algeria, Angola, Equatorial Guinea, Gabon, Libya, Nigeria, and the Democratic Republic of the Congo.  Saudi Aramco is due to go

public on December 11, listing a small portion of its shares on the Tadawul All exchange based in Riyadh, after kicking off the process on Sunday. It's expected to a mammoth public offering and could value the company at up to $2 trillion.

Saudi Officials targetted an IPO of circa $2 trillion, that remains to be seen- Bank of America's low valuation was around $1.2 trillion though $1.5 Trillion seems a more realistic estimate. In any event  it would still be the largest public offering ever, adding to the fact Aramco is currently the world's most profitable company.

For the first half of 2019, it posted a net profit of $46.9bn, almost all of which was paid out in dividends to the Saudi state.

Any company that profitable will attract a high price. By comparison, for the same time period, Apple, the world's largest company by value currently, posted a net profit of $21.6bn, and Exxon Mobil, the largest listed oil company, made $5.5bn.

On Tuesday, OPEC released its World Oil Outlook for 2019 and it said that it saw its own production falling, while saying American shale oil production will overtake OPEC output by 2024. In the last year, OPEC cut its oil production by 1.2 million barrels a day, after forming an agreement with Russia in December, leading to price rising about 17% since January.

The Saudis have constantly repeated the mantra that they would do whatever it takes to balance the market and are also keen to demonstrate to investors that as the de-facto head of OPEC they have the ability to create production policy and move markets.  That their influence in the cartel remains undiminished and such influence can be put to such use as to create favourable financial outcomes for potential investors in Aramco. They have chosen to  produce 400,000bpd beneath their OPEC  quota keeping their production under 10 million bpd in a prolonged attempt to drain OECD  inventories.


Pricing the Aramco IPO will be complicated and global  oil prices will have a important part to play. The Saudis long term objective and reason for selling Aramco is to diversify out of oil at a time  the future of hydrocarbons is becoming  progressively uncertain. The proceeds of any sale will be used to invest in infrastructure and create new forward looking sustainable sectors in the Saudi economy for when the call for oil diminishes. It will be interesting to see whether other national oil companies follow suit

Monday, 28 October 2019 22:29


A combination of tardy economic growth, a reduction in global oil demand, falling energy prices  and shrinking margins in the petchem market have seemingly conspired to plunge 3rd quarter earnings for supermajors. Five of the world’s largest publicly traded oil and gas companies, Exxon Mobil Corp., Royal Dutch Shell Plc, Chevron Corp., Total SA and BP Plc -- are expected to disclose a 42% plunge in third-quarter earnings, on average, when they post their  results this week. Oil prices have only dropped by 18% over this same period.

BP plc (NYSE: BP) will be  the first to report third-quarter results. When the company issues its report Tuesday morning, analysts are looking for earnings per American Depositary Share (ADS) of $0.59 and revenue of $64.16 billion. In the third quarter of last year, BP reported earnings per ADS of $1.14 and revenue of $79.47 billion. In the second quarter of this year, the company posted earnings per ADS of $0.83 and revenue of $72.68 billion. A contrarian trend which will not please investors.

The oil industry faces an uncertain future. Every conceivable projection has the global transport fleet increasingly electric. The renewable footprint is growing larger as public opinion and the weight of  scientific evidence seek to eliminate the use of fossil fuels in an attempt to combat extreme climate change.

BP,  similar to many oil majors have sought to make investments in renewables. These have been modest compared to the capital spent  in E&P. One reason for the imbalance is that profits on oil and gas have always been better than profits on renewables, but as costs of renewable energy continue to fall, fossil fuel producers are going to have a n increasingly more difficult time keeping competitive.

As the call for fossil fuel reduces over the next decade supermajors are going to have to make that difficult transition from oil and gas companies to energy companies. A de facto change of their DNA. All this at a time  when these companies have asset values predicated on billions of barrels  of stranded or uneconomically producible reserves.

The supermajors have long been among the stock market’s most generous dividend payers but in the new world of plentiful crude and anti-fossil fuel campaigns, increasing payouts and share buybacks are seen as key to retaining investors. Just as critical is whether the companies can afford them: the supermajors’ dividend yields this year surged to more than double the return on 10-year Treasury notes.


While none of the five companies’ dividend programs are in jeopardy, investors are keen to see how sustainable they are when balanced against costly drilling and construction projects, such as Exxon’s $30 billion-a-year spending program, and Shell’s investments in lower-profit renewable power.

Wednesday, 02 October 2019 17:41




Oil fell as concerns about the U.S. economy triggered another sharp selloff on Wall Street, with the S&P 500 off 1.7%, falling below 2,900. Crude oil benchmarks fell n morning trading Wednesday on the NYMEX on a larger than forecast build in crude inventories and a sharp decline in US equities. WTI futures fell 2.3% to $52.37, around its lowest in September and Brent was also down 2.3% to $57.55.

In recent days US economic data has raised concerns and heightened bearish sentiment. Oil fell as concerns about the U.S. economy triggered another sharp selloff on Wall Street, with the S&P 500 off 1.7%, falling below 2,900.

It has also been reported that September private payrolls came in below expectations at 135,000 following Tuesday’s equity losses after the Institute for Supply Management’s manufacturing PMI came in at a 10-year low. That raises questions about future demand for oil in the U.S. at a time when global economic growth is tardy.


The EIA reported U.S. oil inventories were up 3.1 million barrels last week, Analysts had predicted a rise of about 1.57 million barrels of crude for the week ended Sept. 27. The American Petroleum Institute (API) which is rapidly losing all credibility had predicted a 6 million barrel draw. The inventory conundrum is just that and depends on Refinery runs, importation and stocks of gasoline and distillates to be computed to obtain a reliable figure in addition to factoring in production, manufacturing and purchasing indexes. The build was more than twice the EIA predictive model forecast.


All this against the backdrop of lowest OPEC production for over a decade and geopolitical disruption in Saudi Arabia . It seems clear that the market is more sensitive to the outcome and effects of the US-China trade war on global demand than any imminent geopolitical supply side disruption. Impending US-China trade talks have far greater effect on oil benchmark prices than the possibility of a supply disruption.

President Trump said Wednesday he will tighten the economic screws on Iran, as the U.S. and Saudi Arabia begin to coordinate a response to the drone strikes on the kingdom’s oil processing facilities. US intelligence has put Iran firmly in the frame, though beyond the wreckage of crashed drones , currently there is no definitive evidence.

As a consequence oil prices extended their losses today as the market evaluates Trump's strategy of extending economic sanctions seemingly making a military response unlikely in the wake of the attacks on key Saudi Arabian oil installations last week.

Earlier today WTI futures were down at $58.12 a barrel, compared to $58.73 a barrel immediately before the Trump tweets. Dated Brent was at $63.37, down 1.7% on the day and down from $63.92 before the tweets. Oil prices had already fallen steeply on Tuesday, after Saudi Arabian Energy Minister Prince Abdulaziz bin Salman had said the kingdom expects to restore oil production levels to pre-attack levels by the end of the month.

Trump said via Twitter that he had “"just instructed the Secretary of the Treasury to substantially increase Sanctions on the country of Iran!" . Secretary of State Mike Pompeo is meeting Wednesday with Saudi leaders to discuss the Saturday drone strikes that disrupted the global oil supply. It seems unlikely that such a meeting will produce a grand plan of military action.

Saudi Arabia has adequate inventories to cover for the supply gap, but only for a few weeks. Though worryingly it has emerged that much of the country’s spare capacity may have become unusable, if only temporarily. And because Saudi Arabia accounts for the majority of the entire world’s spare capacity, the disruption would not leave a lot to fall back on. Prince Abdulaziz bin Salman has done a sterling job in allaying the fears of the oil market and convincing it that Saudi Arabia can quickly restore production.

There are however substantive issues which need to be assesed. Several days after the attack took place, it is still unclear how and what exactly struck the Abqaiq facility, or where the strike emanated . This raises the spectre of future attacks. Given the size of the processing facility it is a colossal single point of failure which amplifies supply side vulnerability. If as the Houthis would have us believe, they were responsible for the strike, they now alarmingly possess the capability to create global economic calamity. This is a risk that has been mispriced by the market and it will be interesting to see how the market reacts in the coming days as counter-measures are devised to mitigate the risk.

Some defense hawks in the U.S. want Trump to send a more forceful message. Notably Sen. Lindsey Graham, South Carolina Republican, he said Tehran might have interpreted President Trump’s decision to call off a military strike in June as a sign of weakness. President Trump who it now seems clear does not want to get embroiled in a war in the Middle East rejected that view, saying he is operating from a position of strength as the administration applies “maximum pressure” on Iran through sanctions.


The Houthi Rebels conjure up a picture of a poorly trained and ill equipped fighting force, the sort that would seek refuge in caves or a djebel somewhere in the desert. But like so many of the rag-tag resistance groups that have come before them, they are proving endlessly resilient. According to Gulf News ten automated, aerial, combat drones launched an attack on Saudi Aramco’s Abqaiq plant in Buqyaq and the Khurais oil field on Saturday at 3:31 a.m. and 3:42 a.m. local time. Attacks on Saudi Arabia's pivotal Abqaiq processing facility and Khurais oil field have raised questions over the vulnerability  of the kingdom's production capability. Saudi Arabia said the drone attacks on saturday had caused them to  suspend the production of 5.7 million barrels of oil a day (almost 6% of global production)  but re-iterated  export customers would continue to be supplied from inventories; Saudi stockpiles totalled 187.9 million barrels in June. 

 The Abqaiq facility is the single most important facility in Saudi's oil industry, it is Aramco's largest oil processing facility and processes about 50% of the company's crude oil production.  Khurais is the second biggest oil field.

 After a number of strikes on key oil infrastructure and shipping routes this attack is a potential game changer. In recent times flows had been temporarily halted through Saudi Arabia's main oil transport pipeline to terminals and refineries on the Red Sea, whilst  oil tankers have come under attack  in the Persian Gulf, but nothing of this magnitude which palpably demonstrates the Houthi ability to punish Riyhad severely. That is of course if we accept that it was carried out by the Houthi and not the Iranians. The US seem in no doubt, Despite the Houthi rebels claiming  responsibility for the strikes, the American Secretary of State blamed Iran,  rejecting the claims by Yemen's Iran-backed Houthi rebels that they had carried out the attacks. Kelly Anne Conway also stated " "The Iranian regime is responsible for this attack on civilian areas and infrastructure vital to our global energy supply, and we're not going to stand for that... We will continue our maximum pressure campaign in Iran."  Iran's Foreign Minister Javad Zarif responded by saying that "blaming Iran won't end the disaster" in Yemen.

 I must raise the question of quite how these drones penetrated  the expensive Saudi air defence systems to hit strategic targets so deep inside the county's territory.  The US Fifth Fleet is based in Bahrain, and America has air bases and other facilities along the Gulf from Kuwait to the UAE protected by its air defense. It seems odd that these drones were able to  seek  and destroy their targets uncontested  and under the radar. It is difficult to fathom and perhaps only time will tell.

It has to be said that over the last year or so the Houthis have developed their capacity to hit targets in both the UAE and Saudi Arabia. A Houthi drone hit a Saudi Aramco oil refinery outside the capital Riyadh in July, a company executive and a Gulf official said. That month, a Houthi drone evaded Emirati air defenses and exploded at Abu Dhabi’s international airport in the United Arab Emirates. These strikes have been denied by the saudi, emerati and US authorities and the Houthis derided as a backward, tribal group that lacks sophistication. Such a narrative allays concerns and allows any blame to be directed at Iran, a more technically sophisticated and politically ameanable foe. The WSJ in an article published in May highlighted increasing Houthi sophistication

The attack will cause a spike in crude oil benchmarks particularly dated Brent, on monday morning, this commentator believes the market is likely to go into steep backwardation, Platts Analytics have forecast  that additional risk premiums "could see prices test $80/b despite Saudi assurances that, " production and exports will not be significantly impacted ".

Saudi crude is generally a mix of heavy to medium sour oil, which is generally high in sulphur and yields a decent amount of residual fuel and vacuum gasoil. particularly popular and well suited for the  complex Saudi Chinese JV refineries and those in Asia, US and Europe which can crack heavy sulphurous crudes, and still yield distillate products due to the refiners having complex secondary units.

 Dominic Raab, the Foreign Secretary, called the strikes an “egregious attack on the security of Saudi Arabia" and a "reckless attempt" to disrupt global oil supplies. Yet he is quiet when Saudi warplanes with British munitions bomb school buses and kill innocent children

The American Petroleum Institute (API) had estimated a crude oil inventory build of 401,000 barrels for the week ending Aug 29, compared to analyst expectations of a 3.50-million barrel draw. There will be an explanation for the disparity but that is not the most important thing at the moment

Had that been confirmed by EIA figures, the inventory build this week would have taken away from last week’s draw in crude oil inventories of 11.1 million barrels, according to API data. The EIA estimated that week there was an inventory draw of 10.0 million barrels. It is on such figures that bulls are reared. The implication being a steady inexorable draining of OECD crude inventories, on the way to balancing the market.

However the EIA bemused oil traders  after Labor Day, when it reported that U.S, crude supplies declined by 4.8 million barrels for the week ended August 30 in line with analysts previous calculations. If nothing else this episode has re-inforced to the market the effect of the inventory numbers have on it.  It has also  perhaps emphasised the importance of the EIA and their numbers to the detriment of the API. Is it now conventional wisdom to wait for the EIA numbers?

Currently apart from  China's GDP growth and PMI numbers and possibly with the exception of Trump's oil market tweets, the inventory figures have had the most pronounced effect on global oil market benchmarks as the markets actors see them as reliable integers of market equilibrum for pricing reasons.

The EIA report went on further in detailing U.S. crude oil refinery inputs which averaged 17.4 million barrels per day during the week ending August 30, 2019, which was 27,000 barrels per day less than the previous week’s average. Refineries operated at 94.8% of their operable capacity last week. Gasoline production decreased last week, averaging 10.3 million barrels per day. Distillate fuel production decreased last week, averaging 5.2 million barrels per day.
U.S. crude oil imports averaged 6.9 million barrels per day last week, up by 976,000 barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.9 million barrels per day, 12.5% less than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 717,000 barrels per day, and distillate fuel imports averaged 126,000 barrels per day.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.8 million barrels from the previous week. At 423.0 million barrels, U.S. crude oil inventories are at the five year average for this time of year.


Saturday, 31 August 2019 21:01


Oil futures closed lower  after reports emerged that Russian Energy Minister Alexander Novak said Russia’s oil output cuts in August will be slightly smaller those agreed to under the deal between OPEC and non-OPEC producers.

RIA and Interfax news agencies quoted Russian Energy Minister Alexander Novak as saying he will discuss the agreement and the state of the oil market at OPEC's Joint Ministerial Monitoring Committee meeting on Sept. 12

As for OPEC, the group is facing a weaker demand outlook due to slowing global growth. In July, OPEC ministers agreed to a nine-month extension Opens a New Window.  of its previous deal to cut production. That deal reduced production by 1.2 million barrels per day starting Jan. 1. After July’s meeting, the deal was extended through March 2020

OPEC oil output rose in August for the first month this year, with members of the group pumping 29.61 million barrels a day, up 80,000 barrels a day from July’s revised figure, according to the results of a Reuters survey reported Friday.


Earlier this week, OPEC’s Joint Ministerial Monitoring Committee, which monitors OPEC and non-OPEC member compliance with the cuts, pegged overall conformity at 159% in July, up 22% from June.

Monday saw the US benchmark WTI crude for  October delivery  fall $1.61, or 2.8%, to settle at $55.10 a barrel on the NYMEX. It’s been a tough August for crude, with the commodity slipping into a bear market. Front-month prices for the U.S. benchmark suffered a 5.9% monthly decline, according to Dow Jones Market Data.

The effect of Russian oil production on market sentiment has never been more pronounced. Whilst the market has always acknowledged Russian oil production, the announcement of slightly higher production figure now seems to have a similar effect to an EIA  crude inventory report. Advance notification of such information could be financially very lucrative in the right hands, certainly if the intention was to short the market.

Forecasted contracting demand for  global oil has made any unexpected increase in production a fundamental reason for  declining crude  oil benchmarks. It now seems clear that  Russian  oil production has the ability to swing the market

The crude oil market is hostage to a global economy which shows every sign of entering into a recession in 2020. Yet the volatility it experiences seems mostly on weekly US inventory numbers but more extraordinarily  as  a consequence of a bombastic and self-serving US President.  Concerns about trade will continue to persist as long as the market cannot confidently rely on the veracity of the information it receives, and most recently the information President Donald Trump provides. For the self-appointed  No1 combatant  of “fake-news”,  President Trump now seems to be firmly ensconced as its foremost purveyor .

Recently trade concerns resurfaced after China’s  Foreign Ministry claimed it was unaware of any telephone conversation or calls between the United States and China on trade. It later urged the US to correct its” wrong actions and create conditions for talks”

Speaking at the G-7 summit in Biarritz President Trump had said he was optimistic about the prospects for a trade deal with Beijing. He said China had contacted his trade team overnight. Last Tuesday, to suggest both sides “get back round table”. President Trump went on to say he had great respect that China called,” they want to make a deal”. All this came after Pres Trump        had referred to the Chinese Premier, as both a foe and an outstanding leader had great respect for too.

But Trump has form for inventing telephone calls as he did earlier in the year when he boasted he had spoken with OPEC on the phone and they were going to bring prices of oil down in response. So many are the incidences of his blatant deceit, they no longer seems to come with any admonishment or shame.  

The American President’s  oft contradictory and vacillating statements have had  huge impacts on financial markets as actors attempt the baffling task of  interpreting  his rhetoric. Trump tweets are now a firmly established factor in gauging market sentiment. The ability to accurately interpret these messages can be the difference between profit and loss. The dramatic swings create unexpected and unpredictable moves in the direction of the market, depending almost entirely on the mood of the President. Perhaps a statistical function as an addendum to a risk metric should be created to capture this new variable.

It does not help that most of these comments are hyperbolic in  nature and made outside normal trading hours, quite frequently nocturnal. President Trump insists that is the way he negotiates, he goes on to say it has held him good stead over the years, and is doing even better for the country. Many observers would disagree, his Trumpian play book, a mix  of destructive disorder, bromance and poker have not served him well, which would be quite plain If his business record was  put under any degree of scrutiny. Most sensible analysts react to Trump tweets with extreme caution. It is now conventional wisdom amongst most traders and investors that it is a fool’s errand to try and trade on headlines created by Donald Trump.


Despite President  Trump, suggesting he might be having second thoughts over the US-China trade war, he went on to crash the renminbi to a new 11 year low along with stock markets in the Asia-Pacific by stating his intention to slap even higher tariffs on Chinese goods. Demonstration if needed of his ability to move markets. The use of such power needs to be judicious and responsible.


Not for the US President. In what has now become a familiar refrain The White House later came out to clarify President Trump’s statement. They stated that it had been greatly misinterpreted and it was his intention to pursue an even more aggressive trade policy toward China and that his regrets were not raising the tariffs even higher.

But there is an even more substantive issue which has not attracted a great deal of scrutiny thus far. In the event that insiders have prior knowledge of a contradictory Trump statement, such knowledge would be of immeasurable commercial value. If I had prior knowledge that President Trump was to make a statement to the effect he was completely removing all triffs from Chinese imports to the US, I would make a fortune, as would any trader. Is there a method to his contradictory statements which are concieved to move the market in a certain direction, for example shorting futures and commodity positions. Clearly there is no evidence to support this theory, but the frequent contradictory and conflicting announcements certainly warrant further scrutiny. It should not be the case any more than the Chairman of the Fed being allowed to make rash comments. it is an  issue that neither the SEC or the CFTC are equipped to handle.

In years to come it may well be called “Trumponomics”, it may well be taught in colleges too, Its effects are unclear,  though most economists see them as calamitous. Now just at the wrong time for Trumponomics,  it is reported that the  U.S. manufacturing purchasing managers index (PMI) declined to  49.9 in August, the lowest level for almost a decade. A reading above 50 indicates growth in the manufacturing sector, which accounts for about 12% of the U.S. economy. It is clear the cacophony created by Trump around trade war has weighed heavily on activity as investment wanes.

The latest manufacturing PMI reading signalled the sharpest order book downturn in ten years. Export sales during August 2019 were also at their lowest since August 2009. According to Tim Moore, an associate economics director at IHS Markit, “August’s survey data provides a clear signal that economic growth has continued to soften in the third quarter.” He added, “Manufacturing companies continued to feel the impact of slowing global economic conditions, with new export sales falling at the fastest pace since August 2009.”

The services sector PMI reading also fell to 50.9 from July’s 53.0. This was also below economists’ expectation of 52.9. It was one of the most concerning aspects of the latest data, as new business growth slowed down to its weakest level in a decade “driven by a sharp loss of momentum across the service sector.”

 Though it must be said the US is not alone in the contraction of manufacturing index PMI’s. China has had contraction for 4 straight months as have the EU.

On a weekly-average basis, both Brent and WTI gained slightly; however, both crude benchmarks ended the week lower than they began it. Brent increased $0.62/bbl to average $59.87/bbl (only slightly below our $60/bbl forecast) while WTI increased $0.23/bbl to average $55.55/bbl.  There are concerns that China prepared to tough it out with the US.

President Trump has  claimed  that Chinese officials have reached out in a desire to resume trade negotiations. The market has become increasingly wary of President Trumps claims and since the Chinese have not confirmed his statement it is well worth discounting. The Chinese at least publicly have always maintained they would prefer a negotiated trade deal and not an escalation. Only last week Trump was railing at US firms doing business in China, ‘ordering’ them back to the US .  The Trump Administration is pursuing a policy of ‘decoupling’ the US economy from China and ending any interdependency the countries might have. The trade war with China only sees signs of escalation as Trump has vowed to change the worlds trading system to favour the US against a determined, focussed and motivated China.

President Trump has made the return of US manufacturing jobs and their protection the cornerstone of his ‘make America Great Again’ policy. A policy many would argue put him in the White House. Yet along with yield curve inversion concerns, the contraction in US manufacturing has  increased the market’s concerns regarding an upcoming recession. Perversely it would seem that President Trumps policy of restructuring the US trade by initiating a trade wars against China has quite the opposite effect

Nigeria has reaffirmed its unwavering commitment to OPEC production cuts  by increasing production of its own oil to its highest output levels  since 2015. The production cuts  were agreed upon under the Declaration of Cooperation (DoC) between member States of the OPEC and Non-OPEC Countries at the last Ministerial Meeting of what is known as OPEC+, held in Vienna on July 2, 2019

Other member states not least Saudi Arabia would be right to  question Nigeria’s commitment to the grouping’s policy . Certainly after shouldering the largest burden of the cuts meant to rebalance the demand supply equilibrium in global crude oil markets by draining OECD inventories. According to released production figures  Nigeria remained the largest culprit  in breach of its quota,  surpassing it by over  240,000 barrels per day  (bpd) at 1.93M bpd in July. According to Platts’ data, Nigeria’s production output rose to 1.97M bpd in June, up from the 1.69M bpd quota under the cut agreement.

The Nigerian Government  has based its budget on an oil price of $60/b, a benchmark that now seems slightly optimistic given the bearish sentiment caused by the US-China trade war and an overall slowdown in global economic growth. But the figure was crucially based on producing 2.3M bpd of crude oil and condensates.

Nigeria currently benefits from the lack of clarity on how condensates are defined by OPEC. Though  the definition is based on that of  the American Petroleum Institute, that definition  focusses only on whether the oil was a gas when extracted. Once liquefied  there is no widely agreed definition. Nigeria does indeed produce quite a bit of condensate, but apart from Akpo it is rarely measured because it is mostly blended with  crude streams.  The other condensate grade Oso production  has declined so substantially,  that it is also blended into the Qua Iboe crude stream.

Nigeria’s Increase in  production has come as the Total SA operated ultra  deep water Egina has come on stream. It currently produces over 200,000 bpd.  NNPC the national oil company has made it clear  output from the  Egina field would be classified as condensate. This would exempt its production from OPEC quotas.

The NNPC’s Group Managing Director  said “ with our partners, we are driving the national aspiration to grow the national reserve to 40 billion barrels by 2025 and improve crude oil production to three million barrels per day.

Increased reserves will give Nigeria a higher quota in the OPEC but until such a time the bait and switch with condensate is an economic necessity. Whilst actual figures for Nigerian condensate production is sketchy, NNPC claim to produce about 400-500,000 bpd.  In March the GMD of NNPC when addressing the Senate Committee on Finance on the 2019  – 2021 Medium Term Expenditure Framework (MTEF) confirmed the production target of 2.3M bpd included condensates which would amount to the difference between the OPEC quota of 1,69M bpd and the 2.3M. That would mean Nigeria classifying over 600,000 bpd or 25% of its petroleum production as condensates to exist within current quotas.


Clearly Nigeria will not be able to get away with classifying any production over the OPEC quota as condensates despite NNPC’s best efforts. Many secondary sources used by OPEC such as S & P  Global Platts currently classify the Agbami grade as crude oil and not condensate which harbours the potential of significant disputes between OPEC and Nigeria going forwards.

Given the bleak outlook of a trade war that seems to be on escalating trajectory, the continual downward revisions in crude oil demand through 2020 and the increase in tight US shale, it seems likely that OPEC may have to cut by another 1.4M bpd to keep the market from crashing into a bear pit.


This would require further cuts to OPEC quotas amid a tumbling crude oil price. It is unlikely that Nigeria will escape such a cut and increased scrutiny over compliance and  the definition of condensates.

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