LAGOS—IndicationS emerged weekend that Nigeria may earn more from oil as prices are estimated to firm at $37 per barrel for the rest of the year and 2005. It means that Nigeria will earn about $11 per barrel above the 2004 budget projection of $25 per barrel. This will give the Federal Government a windfall of $4.554 billion or N610.2 billion in the second half of 2004. The prospect for higher oil earnings is coming on the heels of strong global demand for oil, limited supply and continuing security fears in the US which led the US government on Wednesday to raise its central price forecast for US crude over the next 18 months to $37 a barrel. The prospect became brighter as Britain came within an ace of becoming a net oil importer for the first time in 13 years in May, helping the country’s trade deficit widen unexpectedly to £3.4 billion
British National Statistics said the surplus on trade in oil was £137 million in May compared with £184 million the month before and nearly £400 million in March. By volume, imports have already exceeded exports, with inflows of 4.91 million tonnes of oil in May exceeding inflows of 4.80 million tonnes. Britain has not announced higher imports of oil than exports from its North Sea fields since August 1991. While deficits were initially reported for September and April the figures were later revised to show surpluses.
OPEC, however, said it will go ahead with a production increase of 500,000 barrels a day in August, Saudi Arabian Oil Minister Ali al-Nuaimi assured doubters on Friday. He added that at the end of this month his country would open facilities, increasing output by 650,000 barrels per day. Earlier, OPEC president Purnomo Yusgiantoro had said in Jakarta that “OPEC still has a commitment to raise its quota by 500,000 barrels a day beginning in August.” In London, the price of Brent North Sea oil for August delivery fell by 31 cents a barrel to $37.46 in line with the US projection.
New York’s light sweet crude for August delivery eased 27 cents to $40.06. The Organisation of Petroleum Exporting Countries (OPEC) decided in Beirut at the beginning of June, amid record high oil prices, to increase its overall production quotas from 23.5 million barrels per day to 25.5 million barrels per day on July 1 and by a further 500,000 barrels per day on August 1. The monthly oil outlook report of the Energy Information Administration, forecasting arm of the US energy department, said in June that prices for West Texas Intermediate were likely to fall gradually over the rest of 2004 and 2005 to $33 a barrel. As recently as April, it forecast crude falling below $30. The EIA report said: “The chances for even a gradual, sustained decline in crude oil prices through 2005, as previously projected, seem to have diminished.” Guy Caruso, chief executive, told Congress “While our forecast has crude oil prices easing slightly through third quarter, the world market will still be tight as world petroleum demand picks up seasonally in the fourth quarter, increasing potential for unexpected upward price pressure [on oil] this winter.”
The EIA’s upward revision came as Ali al-Naimi, Saudi Arabian oil minister, said in an interview that members of the OPEC gathering for their next meeting in Vienna on July 21 would go ahead with their plan to increase Opec’s output quota. This would result in a quota increase of 500,000 barrels a day to 26m bpd from August 1. Mr Naimi’s comments, to the Middle East Economic Survey, were seen as an attempt by the most powerful oil minister within Opec to cool oil prices, which moved to within striking distance of $40 a barrel on Tuesday for the first time in just over a month, before falling 65 cents to $39 last Friday. Saudi nervousness resurfaced after a week in which oil prices have climbed by 12 per cent after having fallen to two-month lows. US crude futures are trading about $39 a barrel, well above the $25 level that Mr Naimi said was a reasonable price for both consumers and producers. It has been more than nine months since Saudi Arabia or other Opec producers received prices as low as $25 for their crude oil.
Although Mr Naimi also told MEES that Saudi Arabia remained committed to the official $22 to $28 a barrel Opec price range, most of the cartel’s remaining members are seeking to raise the price band. Kuwait, a strong US ally added its voice to the chorus when Sheikh Ahmad Fahad al-Ahmad al-Sabah, the country’s oil minister, who was visiting China, told Dow Jones in Beijing that $28 to $35 was a reasonable price range for the Opec’s oil.
Sheikh Ahmed said: “It looks almost certain the market will continue above $30. For that (reason), I think we have to study carefully changing the basket price to about $30-$35.” Analysts said that Opec’s price band had lost much of its credibility among consumers because prices since November had fallen within its range on only a handful of days.
Michael Rothman at Merrill Lynch said: “Opec as a group has done a less than credible job during 2004 administering the targeted price band by having emitted mixed signals and actions when prices moved to levels that were viewed as too high.”
