Nigerian Oil Grades Command Premium Prices Amid Global Supply Concerns

Samuel Mobolaji

Nigeria’s oil grades, including Brass River, Bonny Light, and Qua Iboe, have maintained their premium status by trading significantly higher than the current Brent crude benchmark.

During the week, Brass River and Qua Iboe were trading at approximately $81.60 per barrel, while Brent Crude, the global oil benchmark, was trading at around $78 per barrel. This premium pricing is largely driven by supply concerns over Libya and a smaller-than-expected draw in U.S. crude oil inventories, which have dampened demand expectations.

Despite Brent Crude prices declining by more than 1% after U.S. crude inventories dropped by 846,000 barrels to 425.2 million last week, Nigeria’s oil sector has shown signs of improvement, providing a boost to the local economy.

Nigeria’s gross domestic product (GDP) grew by 3.19 per cent annually in the second quarter, up from 2.98 per cent in the previous quarter, according to the National Bureau of Statistics.

This growth was bolstered by increased crude production, which helped offset the adverse effects of the naira’s devaluation on the non-oil sector.

Since taking office in May 2023, President Bola Tinubu has implemented a series of economic reforms to attract foreign investment and enhance Nigeria’s oil production. Finance Minister Wale Edun has set a target for a three per cent economic growth rate this year, up from 2% last year, with ambitions to return to a six per cent growth rate, last seen in 2014.

NBS data shows that Nigeria’s oil production rose to 1.41 million barrels per day in the second quarter, compared to 1.22 million barrels per day in the previous year.

In response to Nigeria’s ongoing struggles to meet its OPEC production quotas, the Nigerian National Petroleum Corporation (NNPC) declared a state of emergency in the sector during the Nigeria Oil and Gas Conference and Exhibition in Abuja.

Oritsemeyiwa Eyesan, the NNPC’s executive vice president, projected that Nigeria’s daily oil production could rise to around 2 million barrels per day by the end of the year.

Support for Tinubu’s administration also came from oil and gas marketers under the Natural Oil and Gas Suppliers Association of Nigeria (NOGASA), who endorsed the order for the Nigerian state oil company to sell crude oil to Nigerian refineries in naira.

NOGASA President Benneth Korie called on the government to tackle smuggling and reconsider customs practices at the borders to prevent the unauthorized export of petroleum products.

He argued that addressing smuggling, developing the agricultural sector, improving transportation infrastructure, and streamlining taxation could significantly contribute to rebuilding Nigeria’s economy.

Global factors have also influenced oil prices. In Libya, production disruptions due to power struggles over control of the central bank have led to estimated outages of between 900,000 and 1 million barrels per day.

This supply disruption could affect OPEC+ production plans and positively impact oil markets if the situation persists. Meanwhile, comments from Federal Reserve Bank of Atlanta President Raphael Bostic about the potential for the Federal Open Market Committee (FOMC) to reduce interest rates have also contributed to supporting oil prices.