Nigeria’s oil production rises to 1.3mbpd in July

Nigeria's crude oil production has increased to 1.307 million barrels in July, according to data released by the Organisation of Petroleum Exporting Countries (OPEC). In addition, refiners in Nigeria have raised their domestic crude demands for the second half of 2024 to 597,700 barrels per day. Chinnan Dikwal, Vice Chair at the African Energy Council, joined CNBC Africa to discuss the implications of these developments. The OPEC monthly oil report has garnered significant attention, especially regarding global oil demand and supply dynamics going forward. The latest report indicates a shift in OPEC's position, with revised projections for oil demand. While OPEC had originally forecasted a global oil demand growth of 2.25 million barrels per day for 2024 and 1.85 million barrels per day for 2025, the recent report has revised these numbers down to 2.11 million barrels per day for 2024 and 1.78 million barrels per day for 2025. This revision marks a significant departure from OPEC's previous forecasts, aligning more closely with the projections of the International Energy Agency (IEA), which has consistently estimated lower demand figures than OPEC. The divergence in outlook between the two agencies underscores the uncertainties in the global oil market. Turning to Nigeria, the country saw a modest increase in oil production from 1.27 million barrels per day in June to 1.3 million barrels per day in July. While this uptick is a positive sign, it falls short of the OPEC quota of 1.5 million barrels per day and Nigeria's budget target of 1.78 million barrels per day for 2024. Despite the challenges in meeting production targets, the incremental increase in output is a step in the right direction for Nigeria's oil sector. The implications of these developments on oil prices are significant, especially in light of evolving demand trends. While geopolitical tensions have historically supported oil prices, concerns about weakening demand from China have tempered expectations. The easing demand growth in China, coupled with uncertainties in the manufacturing and property sectors, has contributed to a more cautious outlook on oil prices. As of now, the price of oil stands at $82 per barrel, with projections suggesting a tight market in the third and fourth quarters of 2024. However, the upcoming travel season in the Western world may provide some support to oil prices, albeit with volatility. Looking ahead, the price of oil is expected to remain below $85 per barrel by the end of the year, barring any major geopolitical events. Nevertheless, the tensions between Israel and Iran pose a persistent risk that could propel oil prices to $100 per barrel if conflicts escalate. In terms of supply dynamics, OPEC's decision to potentially increase supply from October 2024 faces uncertainties due to the delicate balance between demand and supply. The weak demand from China has created a challenging environment for oil producers, with questions surrounding the viability of ramping up production in the current market conditions. While Nigeria faces challenges in meeting its production targets, the global supply landscape remains complex, with spare capacity potentially available if needed. The evolving dynamics in both demand and supply will continue to shape the trajectory of oil prices and production levels in the months ahead.