Nigeria’s crude oil production
A Bloomberg survey indicated that Nigeria’s crude oil production fell by 130,000 bpd (barrels per day) to 1.4 MMbpd (million barrels per day) in August 2016 compared to the previous month. A Reuters survey reported that Nigeria’s crude oil production fell by 50,000 bpd to 1.5 MMbpd in August 2016 compared to the previous month. Production is down 3.2% month-over-month and 20% year-over-year.
Terrorist attacks in Nigeria’s Niger Delta region impacted the country’s crude oil production. Nigeria was the largest African oil producer until 2015. However, terrorist attacks on oilfields and infrastructure led to the decline in Nigeria’s crude oil production. According to the EIA (U.S. Energy Information Administration), the country’s production fell to as low as 1.4 MMbpd in May 2016, which was the lowest level in 22 years. Some sources state that Nigeria’s crude oil production might have fallen to as low as one MMbpd in the past few months.
Nigeria’s crude oil production outlook
The EIA estimated that Nigeria’s crude oil production averaged 1.9 MMbpd in 2015. After falling to as low as 1.4 MMbpd in May 2016, production activity was restored to 1.6 MMbpd in June 2016. However, Nigeria’s crude oil production again fell in July and August due to militant attacks. The EIA expects Nigeria’s crude oil production activity to remain lower until 2017.
In June 2016, the Nigerian government agreed to payouts to the rebels. This raised hopes that the rebels would stop damaging pipeline and oil infrastructure. However, fresh militant attacks in August 2016 disrupted production activity again.
Impact of rising crude oil supplies
The decline in crude oil supplies from Nigeria will have a positive impact on crude oil prices. High oil prices will have a positive impact on the earnings of oil and gas producers like Warren Resources (WRES), Carrizo Oil & Gas (CRZO), and Triangle Petroleum (TPLM).
The roller coaster ride in oil and gas prices also impacts ETFs such as the Energy Select Sector SPDR ETF (XLE), the Vanguard Energy ETF (VDE), the SPDR S&P Oil & Gas Equipment & Services ETF (XES), the Direxion Daily Energy Bear 3x (ERY), and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).
In the next part of this series, we’ll look at how gasoline demand impacts crude oil prices.