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Nigeria Oil and Gas Sector - Q3'20 Earnings Preview

• Following the move by major oil consumers to relax social distancing measures and reopen their economies in May, oil demand recorded significant recoveries from June to August. As a result, Brent prices rebounded to $43/bbl and $45/bbl in July and August respectively, from a record low of $27/bbl in May. However, in September, the uptrend was reversed, with Brent prices shedding previous gains to average $42/bbl, largely due to intensifying concerns over a second wave of the pandemic.

 

• Meanwhile, global oil supply inched higher in the third quarter, as agreed OPEC+ cuts eased to 8 mb/d from a historic 10 mb/d. According to data from the International Energy Agency (IEA), global oil supply increased by 1.1 mb/d to 92 mb/d from July to August, although still lower than 2019 levels. While there was a growing speculation on possible oil market rebalancing due to weaker crude prices in September, members of the OPEC+ coalition reached no agreement to introduce deeper cuts; rather, the defaulters of existing cuts were ordered to compensate for their non-compliance by cutting their supply by an amount larger than initially agreed.

 

• While Nigeria’s full Q3 output data is yet to be released, preliminary OPEC figures showed that Nigeria’s oil output (excluding condensates) dropped to 1.5 mb/d in July and August from Q1 and Q2 averages of 1.8 mb/d and 1.6 mb/d respectively. The drop in the country’s crude output in the two-month period was primarily driven by partial compliance with the existing OPEC+ cuts, as the country continues to face mounting pressures from its OPEC peers to meet its production quota of 1.4 mb/d.