The global oil and natural gas markets are experiencing notable fluctuations, influenced by factors such as rising U.S. fuel inventories and strategic production decisions by major energy corporations.
Global Oil Market Overview:
As of today, oil prices have declined for the second consecutive day, primarily due to significant increases in U.S. fuel inventories. Brent crude futures have decreased by 8 cents to $76.08 per barrel, while U.S. West Texas Intermediate crude futures have fallen by 11 cents to $73.21. Despite this downturn, anticipated higher winter fuel demand and supply concerns have limited further declines. U.S. gasoline stocks have risen by 6.3 million barrels to 237.7 million barrels, and distillate stockpiles have increased by 6.1 million barrels to 128.9 million barrels. In contrast, crude inventories have decreased by 959,000 barrels.
The demand for oil in January is projected to grow by 1.4 million barrels per day, driven by increased heating fuel usage due to colder-than-usual winter conditions and early travel activities ahead of China’s Lunar New Year. Analysts highlight potential supply tightening and increasing demand as key factors influencing the market structure. Additionally, the market is closely monitoring China’s demand, prospective U.S. administration policies, and the ongoing Russia-Ukraine conflict.
Global Natural Gas Market Overview:
The natural gas sector is currently facing challenges, with major energy companies adjusting their production forecasts. For instance, Shell has revised its gas production forecast downwards for the fourth quarter of 2024 and has cautioned that gas and chemicals trading performance will be significantly lower than in previous quarters. This adjustment is attributed to planned maintenance at the Pearl plant in Qatar and a reduction in LNG volumes.
Additionally, the expiry of hedging contracts has affected Shell’s gas trading results. The company also anticipates a loss in its chemicals subsegment and will take an $800 million to $1.2 billion impairment in its renewables business. Despite these anticipated weaker results, analysts believe it will not affect shareholder returns or the broader outlook.
Nigerian Context:
In Nigeria, the oil and gas sector is undergoing significant developments. Seplat, a prominent Nigerian energy company, has acquired the local assets of ExxonMobil, seeking to double production within six months to fill the gap left by major foreign companies retreating from Nigeria’s onshore oil sector. Following this $1.28 billion asset acquisition, Seplat now holds 16% of the country’s production capacity, with 11 onshore oil blocks and five gas processing facilities. The company plans to collaborate with the Nigerian National Petroleum Company (NNPC) and aims to revitalise previously underinvested assets. The withdrawal of international companies, motivated by environmental concerns and declining production, presents opportunities for local firms like Seplat, which leverage their understanding of the local environment to restore neglected assets.
Depot Prices and Local Implications:
The Nigerian government has projected an increase in crude oil production to 2.06 million barrels per day in the 2025 budget, aiming to stimulate economic growth and address key national challenges. This anticipated rise in production is expected to drive down inflation and positively impact the economy.
The interplay between global market dynamics and domestic policy adjustments continues to shape Nigeria’s oil and gas sector. Stakeholders should remain vigilant, monitoring both international trends and local policy shifts to navigate the evolving landscape effectively.
