Market Report: Nigeria Slashes Diesel Prices

The weekly Market Report is provided by Gladius Commodities of Lagos, Nigeria. Download the full report here and learn more about Gladius Commodities at www.gladiuscommodities.com.

Nigeria

Nigerian National Petroleum Corporation (NNPC), following key strategic interventions slashed the price of Automotive Gas Oil (AGO) also known as Diesel by about 42%. AGO is a deregulated product in Nigeria and in the first quarter of 2017, it sold for N300/litre nationwide. In a quest to sustain and improve diesel supply, NNPC set the retail price range from N175-N200 and ex-depot prices between N135 and N155 as at the end of May 2017. NNPC Spokesperson, Mr Ndu Ughamadu mentioned some of the strategic interventions taken by the corporation to improve AGO supply and distribution to include improving distribution from refinery depots by working with relevant downstream stakeholders like Major Oil Marketers Association of Nigeria  (MOMAN), Nigerian Association of Road Transport Owners (NARTO), Petroleum Tanker Drivers (PTD), restoration of critical pipelines and depots such as the Atlas Cove- Mosimi, Port Harcourt Refinery-Aba and Kaduna Refinery-Kano. Furthermore, NNPC in conjunction with the Central Bank of Nigeria (CBN) extended the expansion of Premium Motor Spirit (PMS) Foreign Exchange Intervention Scheme to accommodate both Diesel and Aviation Fuel.

The Minister of State for Petroleum Resources, Dr Ibe Kachikwu, at the 2017 conference of the Modular Refineries Association of Nigeria (MRAN) in Abuja said annually an average of $28 billion foreign exchange earnings is assigned to the importation of about 92% of the petrol consumed locally. Kachikwu stated that 40% of the $28 billion import expenditure was used to finance its logistics. In order to achieve the target of stopping the importation of petroleum products by 2019, a three-pronged strategy will be executed by the Ministry of Petroleum Resources. The benefits of this strategy articulated by Kachikwu include conservation of foreign exchange, job creation, marketplace pricing stability and production stability. The three-pronged strategy consists of; repair and renovation of three key refineries in Port Harcourt, Warri and Kaduna to boost and stabilise supply of petroleum products, support private sector-led Greenfield refinery projects such as the Dangote Refinery and lastly, structuring and mainstreaming of private sector-driven modular refineries to further increase the supply of petroleum products and end importation. Kachikwu confirmed investors have expressed willingness to provide support and finance the repairs of the three refineries at an estimated cost of about $1.2billion.

The July deadline set by NNPC to start oil exploration in Borno state is soon approaching, however, the visible absence of the preparatory heavy duty equipment crucial to exploration for the planned exercise shows it may not commence as expected. The oil exploration site located at Kukawa Local Government area of Borno state is under security threats by Boko Haram terrorists’ activities, thus jeopardizing the commencement of the exploration exercise. A correspondent from the NNPC stated that the corporation is currently discussing with stakeholders which include the traditional rulers, host communities, the Military and other security operatives to determine the feasibility of starting the operation this June. The information officer for Kukawa Local Government area Saa’d Usman said that “until the Nigerian Military declares the place safe, nobody can go there now as it is still a no-go area”.

Ghana

In an interview with the New Crusading Guide, a Ghanaian newspaper, at the launch of the 2016 report on Oil and Gas production in Ghana, the chairman of the Public Accounts Committee (PIAC) Mr Joseph Winful said Ghana’s crude oil output from its Jubilee field is higher than the figures being recorded by the oil companies as production figures for the year. The incorrect recorded figures originate from improper checks and control measures taken by Ghana Revenue Authority (GRA) officials on the Floating Production Storage Offload vessels (FPSOs) Kwame Nkrumah in the Jubilee oil fields off the coast of Ghana. Winful said that the post of checking and verifying oil production quantity by only one GRA officer on the FPSO and other oil platforms is a great risk as such officer could be compromised. He therefore called for proper measures to be set in place to ensure the right quantities are calculated and recorded by more than one GRA official on the FPSO. The Head of Governance at the German Technical Corporation, Allan Larsey, agreed with Winful and said in the fight against accountability in the Oil and Gas sector, either two or three GRA officials should be on the FPSO to ensure that they undertake proper monitoring checks and balances to help record the right figures for Ghana.

Global

On Thursday 22nd of June, oil prices improved slightly but still remained at the lowest level in 10 months despite the exponential growth of shale output in the US. The U.S. West Texas  Intermediate crude July contract was up 28 cents to $42.81 a barrel at 6:40 AM ET (10:40 GMT), while the ICE Futures Exchange in London Brent oil for August delivery tacked on 41 cents to $45.23 a barrel. The U.S. Energy Information Administration (EIA) weekly report for Wednesday 21st June showed a fall in crude oil inventories by 2.5 million barrels in the week ending June 16, whereas market analysts expected a fall of 2.1 million barrels. The EIA also reported a rise in domestic output by 20,000 barrels to 9.35 million barrels per day (bpd). Oil prices have been under pressure in recent weeks due to the steady increase in U.S. shale output despite production cuts by OPEC and non-OPEC members. Last month, OPEC/non-OPEC producers extended a deal to cut 1.8 million barrels per day in supply until March 2018. Thus far, the production cut agreement has had little impact on global inventory levels as U.S. shale output and supply from producers that are exempt from the OPEC deal (Libya and Nigeria) continues to increase. Nigeria’s crude oil exports for August are set to exceed 2 million bpd in, the highest level planned for 17 months.