The prices of crude oil hit a new 2017 high Monday, continuing a rally fuelled by improving demand and expectations that the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC producers will extend output cuts.
The International benchmark, Brent crude rose $1.52, or 2.7 per cent, to $58.38 per barrel, surpassing the highest level of the year.
However, the United States West Texas Intermediate crude remained well below its 2017 high, but topped $51 a barrel for the first time in four months.
It was last trading up $1.06, or 2.1 per cent, at $51.72 per barrel.
OPEC and other oil exporters declined on Friday to extend their agreement to limit production in a bid to drain a global glut that has weighed on prices for three years.
The development coincided with an announcement by the Nigerian Petroleum Development Company (NPDC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC), that it was targeting to grow its oil production capacity to 500,000 barrels per day (bpd) by 2020.
Nigeria had experienced a relief as the meeting of the Joint Ministerial Monitoring Committee (JMMC) of OPEC and Non-OPEC countries in Vienna, Austria extended Nigeria’s exemption from crude oil production cut, thus endorsing the country’s position that the exemption granted it at the November 2016 Ministerial Conference and extended by the May Ministerial Conference should be sustained until it stabilises its crude oil production.
The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, who led Nigeria’s delegation to the meeting, had argued that although Nigeria’s production recovery efforts have made some appreciable progress since October last year, Nigeria is not yet out of the woods.
He noted that even though Nigeria hit 1.802 million barrels per day in the month of August that was not enough justification for a call by some countries for Nigeria to be brought into the fold.
Resurgent production from US shale oil producers, who use advanced drilling methods, has played a major role in delaying the oil market rebalancing.
Higher oil prices this year have encouraged American drillers to pump more, but there are signs the US recovery is slowing.
The number of oil rigs operating in US fields has plateaued recently. A weekly rig count kept by oilfield service firm Baker Hughes fell for the fifth time in six weeks, figures released on Friday showed.
Monthly US oil production figures released earlier this month showed American output ticked down slightly in June to about 9.1 million barrels a day.
Preliminary weekly figures show production at roughly 9.5 million barrels a day in the week through September 15, recovering after a brief dip due to impacts from Hurricane Harvey.
Trader positioning shows the market believes there’s more room for U.S. crude prices to run up.
Hedge funds raised their bullish bets on U.S. crude futures to the highest level in four weeks, the U.S. Commodity Futures Trading Commission reported on Friday. Wagers that oil prices will fall declined for a third straight week, according to the data covering trades through Sept. 19.
Meanwhile, the NPDC has outlined its new production targets saying it aimed at achieving 500,000bpd. It explained that it would grow its production from the current 180,000bpd to 300,000 bpd and 400,000bpd between 2018 and 2019 respectively.
A statement from the Group General Manager, Public Affairs of the NNPC, Mr. Ndu Ughamadu, on Monday in Abuja, quoted the Managing Director of NDPC, Mr. Yusuf Matashi, to have disclosed the company’s target in Benin, Edo State.
Matashi stated that the planned increase in NPDC’s equity oil production was due to the ongoing transformation in NNPC, adding that the company has become the fifth largest oil producer in Nigeria’s oil industry.
He said: “The NPDC has 55 per cent equity in nine blocks of Oil Mining Lease (OML) 4, 26, 30, 34, 38, 40, 41, 42 and 55; non-equity operations in three blocks of selected NNPC joint venture fields; 60 per cent participatory interest in four blocks of OMLs 60, 61, 62 and 63 and 100 per cent ownership of seven blocks of OMLs 11, 13, 64, 65, 66, 111 and 119.
“In a nutshell, the company is involved in 29 concessions which comprises 22 OMLs and seven Oil Prospecting Leases (OPL).”
He further explained that NPDC had varied interests in seven deep-water concessions and successfully executed a global Memorandum of Understanding (MoU) with communities in OMLs 30 and 34.
According to him, the company achieved a major feat by successfully drilling and completing five horizontal wells in nine months in OML 26, leading to production of an additional 7, 000bpd.
The NPDC, he explained, had successfully turned around OML 40 asset from zero oil production to 12,000bpd. This, he stated, underlined its rising profile as the seventh largest owner and operator of Floating Production Storage and Offloading (FPSO) in Nigeria, with FPSO Mystra having the capacity to produce 1.03 million of crude.
He added that NPDC also carried out some intervention activities which led to the peak production of approximately 10,000bpd in OML 65 in June, 2017, and that it is currently the biggest gas producer in the country, as well as the highest supplier of gas to the domestic market.
“NPDC aggressive gas pursuit since 2009 has also raised the company’s profile as the highest single supplier of gas to the domestic market with an average of 700 million standard cubic feet per day (mmscfd).
“The Utorogu Non-Associated Gas 11 plant was also completed recently adding 150 mmscfd; the Oredo 2 gas plant also adds 100mmscfd and the successful re-entry of Odidi which led to an addition of 40mmscfd of gas indeed represents a major achievement for the company and a step forward to achieving NPDC’s aspiration to become a serious global player in the E&P industry,” Matashi said.
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