Ghana’s Jubilee oil production drives Africa’s supply growth in 2011
…Continued divergence trails key benchmarks – OPEC
Africa oil supply forecast is to average 2.69 million barrel per day (mb/d) in 2011, representing an increase of 90 thousand barrels per day (tb/d) from the previous year and a minor upward revision of 10tb/d compared with the previous month, Ghana remains the main driver of growth in 2011 supported by the Jubilee oil development.
On a quarterly basis, Africa supply is seen to average 2.64mb/d, 2.68mb/d, 2.70mb/d and 2.75mb/d, respectively, even as the Organisation of Petroleum Exporting Countries (OPEC) noted the continued difference in key benchmarks.
Total OPEC crude production averaged 29.72mb/d in January, the highest since December 2008, which indicates an increase of 397tb/d, according to secondary sources. OPEC production, not including Iraq, averaged 27.01mb/d, up by 138tb/d from December. Crude oil production experienced increase from Iraq, Saudi Arabia, Angola, and the UAE. While crude output from Nigeria and Iran experienced decline.
Also in Africa, the OPEC in its latest monthly oil market report disclosed that Equatorial Guinea, Sudan and Uganda oil supply forecasts experienced revisions compared with the previous month. “Sudan oil supply is forecast to increase slightly in 2011 to average 0.47 mb/d, indicating an upward revision of 20tb/d compared to a month earlier. The upward revision came mainly from historical data in the fourth quarter of 2010, where production indicated a healthier level than previously expected.
“On the other hand, oil supply forecasts from Equatorial Guinea and Uganda experienced minor downward revisions compared to the previous month’s evaluation. The downward revision came on reports of startup delays of Aseng, Alen and Kasemene developments,” according to OPEC monthly report.
The OPEC Reference Basket maintained its momentum in January, moving within a $90-95per barrel (/b) range, which resulted in a monthly average of $92.83/b, up $4.27 or 4.8 percent from the previous month. This upward trend was attributed to bullish sentiment in the futures markets, which pushed both Nymex WTI and ICE Brent front months to 28-month highs. Improving macroeconomic sentiment, cold weather pushing demand higher, as well as growing investment in the paper market and recent geo-political concerns were the main contributors to the strong market. “Traded volumes of ICE Brent hit a record high in January and resulted in a large premium of Brent over WTI, as WTI futures remained affected by ample stocks in Cushing, Oklahoma. The OPEC Basket stood at $96.93/b on 9 February,” OPEC stated.
Among other factors, geo-political concerns have also been putting pressure on the oil market. OPEC believes that supply fears are, however, unfounded, “as any halt in shipments through the Suez Canal, or the Sumed pipeline, could be compensated relatively quickly, by rerouting crude cargoes. Even before the crisis, these routes were not being utilised at full capacity, mainly due to the ample tanker availability on other routes.
“Winter petroleum product consumption increased, leading to an adjustment in the total world oil demand forecast for 2010 and 2011. Furthermore, a sudden increase in natural gas prices has discouraged power plants from fuel switching, not only in the OECD, but also in some parts of Asia. Furthermore, sturdier industrial activity within the US and China, ignited by stimulus plans and government incentives, boosted demand. As a result, total world oil demand growth was revised up by around 0.2mb/d for 2010 and 2011 to stand at 1.8mb/d and 1.4mb/d, respectively,” the oil cartel stated further.
The non-OPEC supply is expected to have increased by 1.1mb/d in 2010, following a marginal upward revision, mainly due to adjustments to actual fourth quarter production data.
It noted: “In 2011, non-OPEC oil supply is forecast to increase by 0.4mb/d following a minor upward revision. In January, total OPEC crude oil production averaged 29.72mb/d, according to secondary sources, representing an increase of about 400tb/d from the previous month. Stronger heating oil demand due to colder-than-expected weather along with higher diesel demand has kept product market sentiment bullish.
“The sustained momentum in the middle distillate market has kept refining margins health; however, expectations of lower demand for light distillates and fuel oil could start to exert pressure on refinery margins. OPEC sailings were steady in January at 23.6mb/d. Dirty Spot freight rates declined in January due to plentiful tonnage supply, improved weather conditions, new Worldscale flat rates and lower tonnage demand.”
The oil cartel also noted that the demand for OPEC crude in 2010 was estimated at 29.3mb/d, around 0.2mb/d higher than the previous report. With this adjustment, the demand for OPEC crude stood at about 0.2mb/d higher than 2009. In 2011, the demand for OPEC crude is expected to average 29.8mb/d, up about 0.5mb/d from 2010 and 0.4mb/d above the previous assessment.
