Nigeria’s excess crude revenue up $38 million amid rising global prices

Nigeria’s daily excess crude revenue earnings may have increased by about $38 million on Monday as prices reached a $57.01 per barrel at the international crude market.

With approved crude oil price benchmark in the 2016 federal budget at $38 per barrel, about $19 is earned as excess revenue per barrel of crude oil exported.

Nigeria currently has an OPEC quota of 2.2 million barrels per day which is almost met – the NNPC monthly financial & operations report for the month of November 2016 showed that daily crude oil production for October stood at about 1.87 million barrels.

At $19 a barrel savings and average of 2 million barrels produced daily, Monday’s excess oil revenue may be as high as $38 million

Although the approved benchmark in the 2017 budget was adjusted to $42.50 per barrel, close watchers of the global oil industry have said the rising trend in the country’s excess crude revenue earnings is primed to continue in the coming months.

As at December 2016, details from the Federation Accounts Allocation Committee, FAAC, showed that the balance in the excess crude revenue account was about $3.12 billion, from less than $2 billion at the inception of the present administration.

The rising trend is sequel to the decision by the Organization of Petroleum Exporting Countries, OPEC, to intervene in the market, by cutting global output to stabilise supply and boost price of the commodity.

Since OPEC’s December 1, 2016 announcement to cut crude oil production by about 1.2 million barrels per day, effective January 1, crude oil price has been on the rise.

During the meeting, Nigeria, which was granted special concessions, along with Libya, was exempted from output cut due to their peculiar circumstances. The concession is expected to be reviewed in June and extended till the end of the year.

For several months, Nigeria faced massive disruptions in oil and gas production and exports, as militant groups vandalised oil facilities in the Niger Delta region, driving down daily oil production by about a third of the daily capacity.

However, since January 3, immediately OPEC resolution output cut came into effect, crude oil price has maintained a consistent rise, from about $53.13 per barrel to about $54.24 per barrel on Friday, before reaching the latest level of $57.01 on Monday.

But, the price rise appears to be receiving additional impetus following renewed threats to the already frosty relations between Iran and the United States, as the two countries found themselves returning to beating the drums of war over missile tests last Thursday.

Iran, the third largest oil producer in OPEC, with about 3.975 million barrels per day production capacity, was accused of conducting tests of its medium-range ballistic missiles recently, with U.S. President, Donald Trump, condemning it as undermining “security, prosperity and stability throughout and beyond the Middle East.”

Mr. Trump, who said the test essentially put “lives at risk”, warned of serious consequences, including a military option as a response.

U.S. National Security Advisor, Michael Flynn, said the Trump administration had officially put Iran on notice over the issue, saying the test clearly violated United Nations Security Council Resolution 2231 against Iran “not to undertake any activity related to ballistic missiles.”

Analysts say the threat of war by the U.S. against Iran, which may negatively affect oil supplies to the international crude oil market, would be a massive boost to global oil prices.

Iran, whose crude oil supplies to the international market was restored only last year, was itching to recover from the loss it suffered from serving years of U.S.-imposed sanctions, including restrictions on its oil production and exports.

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