International oil benchmark, Brent crude, extended its gains on Wednesday, trading near a two-month high as shrinking oil inventories pointed to an increasingly tight global market.
The upturn in oil prices come as the United States’ sanctions squeezed Iranian crude exports and after the US crude oil production in 2019 was forecast to grow at a slower rate than previously expected, prompting supply concerns.
Brent, against which Nigeria’s oil is priced, stood at $79.64 per barrel as of Wednesday 8:30pm Nigerian time.
The Organisation of Petroleum Exporting Countries, in its monthly oil market report for September released on Wednesday, said crude oil production from Nigeria rose to 1.71 million barrels per day in August from 1.53 million bpd the previous month.
Total OPEC crude oil production averaged 32.56 million bpd in August, an increase of 278,000 bpd over the previous month, according to secondary sources.
“Crude oil output increased mostly in Libya, Iraq, Nigeria and Saudi Arabia, while production declined in Iran, Venezuela and Algeria,” the 15-member oil cartel said.
Since spring when the President Donald Trump administration said it would impose sanctions on Iran, crude traders have priced in a risk premium reflecting the supply shortages that may occur when exports from the third-largest OPEC member are cut.
As the November 4 date for imposing sanctions draws nearer, the premium has increased, according to Reuters.
Washington has told its allies to reduce imports of Iranian oil and several Asian buyers, including South Korea, Japan and India appear to be falling in line.
But the US government does not want to push up oil prices, which could depress economic activity or even trigger a slowdown in global growth.
US Energy Secretary, Rick Perry, met Saudi Energy Minister, Khalid al-Falih, on Monday in Washington, as the Trump administration encourages big oil-producing countries to keep output high. Perry will meet with Russian Energy Minister Alexander Novak today (Thursday) in Moscow.
Russia, the United States and Saudi Arabia are the world’s three biggest oil producers by far, meeting around a third of the world’s almost 100 million barrels per day of daily crude consumption.
The Russian Energy Minister, Alexander Novak, said on Tuesday that Russia and a group of producers around the Middle East, which dominate OPEC, might sign a new long-term cooperation deal at the beginning of December, the TASS news agency reported.
A group of OPEC and non-OPEC producers have been voluntarily withholding supplies since January 2017 to tighten markets, but with crude prices up by more than 40 per cent since then and markets significantly tighter, there has been pressure on producers to raise output.
The US crude production is expected to rise 840,000 bpd to 11.5 million bpd next year, lower than a previous expectation for a rise of 1.02 million bpd to 11.7 million bpd, the US Energy Information Administration said in a monthly report.