By Adewale Sanyaolu
Nigeria and other oil producing countries are optimistic of a rebound in oil prices as expectations remain high over Chinese demand.
An Argus report indicated that the return of Chinese and Indian demand for Nigeria’s and other West African countries’ crude oil grades could to some extent play a critical role in determining the price of the commodity in 2023, an Argus report has shown.
Argus publishes business reports, market assessments and special studies and provides price assessments, business intelligence, and market data for the global energy industry.
The report stated that Nigeria’s attempts to bolster its flagging crude output have been helped by the return of several production and export facilities in recent weeks, notably the resumption of operations at the Forcados terminal.
Latest figures from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC)said, put crude output at 1.19 million bpd last month, up from 1.01 million bpd in October and 940,000 bpd in September.
A major asset that has helped boost production in Nigeria, Argus said, is output from the Bonga crude grade which also increased, to just under 69,000 bpd last November from October’s 61,000 bpd, although it fell short of September’s 106,000 bpd.
Oil is on course for a second straight week of losses, with investors hoping for clearer signs of recovering fuel demand in China to offset an economic slump across the West.
Both major benchmarks were little changed last Friday early morning trading, with Brent Crude down 0.23 percent at $81.98 per barrel, while WTI Crude is down 0.29 percent at $75.66 per barrel.
The lack of movement consolidates definitive downturns in prices this week, with Brent Crude dropping more than five percent in value – extending a one percent loss from the previous week.
WTI Crude has also fallen by nearly five percent after sliding two percent the week before.
Investor anticipation of an economic rebound in China following its U-turn on Zero-Covid restrictions has propped up the oil market so far this year, alongside a weaker dollar that makes the commodity cheaper for those holding other currencies.
However, there has so far been mixed signals on fuel demand recovery in China, which is the world’s top oil importer.
This has weighed down prices in recent weeks.
For instance, ANZ analysts noted a sharp jump in traffic in China’s 15 largest cities following the Lunar New Year holiday, but also recognised that Chinese traders had been “relatively absent”.
Craig Erlam, senior market analyst at OANDA said: “Prices have been on the decline over the last week or so as investors have become less confident in the strength of the outlook, something we could see change repeatedly in this first quarter due to the lack of visibility on interest rate and China’s Covid transition.”
The dollar has dropped in value, as aggressive interest rate hikes by the US Federal Reserve are no longer expected.
While supported by a weaker greenback, oil’s gains have been limited by the prospect of slow growth in the US, and recessions in UK, continental Europe, Japan and Canada.
Investors are also eyeing developments on the expected EU ban on Russian refined goods, as the bloc pushes for a deal to set price caps on all Kremlin-backed oil products.