Nicholas Newman Eniday July 2017
Rising inventories of oil are just one response to the oil glut. It is a common sight around Africa’s coasts to see two-million-barrel oil-tankers lie at anchor for months at a time. Oil traders have been parking surplus oil in South Africa’s Saldanha Oil Terminal, the largest facility of its kind in the world, with a combined capacity of 45 million barrels of oil…
Despite OPEC, Russia and other oil exporters agreeing to cut output by 1.8 million barrels a day for the first half of 2017, the oil price in May has once again fallen to just under $46 a barrel, before recovering slightly to $48. Persistently high oil stockpiles, a resurgence of shale oil output and fears of weakness in China’s manufacturing sector together with a plateauing of demand have revived doubts over a sustained price recovery. Indeed Brent for delivery in December 2020 reflects expectations of a continuing oil surplus at just above $50 a barrel which is problematical not only for “ Big Oil“ but also for oil exporters, long accustomed to high and growing revenues from oil production.
Nevertheless, African OPEC members, with the exception of Nigeria, agreed to cut oil production in order to re-balance supply with demand and raise prices. For example, Algeria agreed to cut production from 1.089 MMbbl/d (million barrels of oil per day) to 1.039 MMbbl/d for the first half of 2017. Likewise, Angola agreed on a reduction from 1.7 million barrels a day to around 1 .2 million b/d for the first half of this year in compliance with OPEC’s Monthly Oil Market Report. Reduced prices and production have hit Africa’s largest oil exporters particularly badly. According to Fitch’s 2017 oil break-even calculations, Nigeria requires $139 a barrel to balance its budget, Angola $82 and Gabon $66 a barrel.