Crude's price may see compounded pressure as the outlook for fuel demand is uncertain amid global growth concerns.
Indeed, both the International Energy Agency (IEA) and Energy Information Administration (EIA) have projected a decrease in crude demand for 2019 while the Organisation of the Petroleum Exporting Countries (OPEC) envisions no change from 2018.
Barring further OPEC cuts or a surprise fundamental development, crude looks to remain pressured.
Besides, the decision by Indian Oil Corp (IOC), the country's top refiner, to sign its first yearly deal to buy U.S. oil, paying about $1.5 billion for 60,000 barrels a day in the year to March 2020, to diversify its crude sources, may affect Nigeria's fortunes.
Specifically, the move may reduce Indian crude oil purchases from Nigeria. Nigeria has been turning to the eastern nations as America, Europe take less of its oil.
IOC is the first Indian state refiner to buy U.S. oil under a yearly contract, in a deal that will also help boost trade between New Delhi and Washington. The company had previously purchased U.S. oil from spot markets and signed a mini-term deal in August to buy six million barrels of U.S. oil between November and January.
While global markets remain comfortably supplied, disruption in Venezuela poses a threat because production of the heavier, higher-sulphur crude it pumps is being reduced elsewhere, the IEA said in a monthly report.
Already, OPEC is cutting output to prevent a worldwide surplus, while member nation Iran is being hit by American sanctions.
At over $65 per barrel, Nigeria's budgetary projections appears safe but there are concerns about the cartel's ability to hold the fort further.
According to an Economist and Lagos Business School lecturer, Dr. Doyin Salami, the Nigerian budget that has been presented before the National Assembly is predicated on an oil volume of about 2.3 million barrels of crude oil per day.
"In essence the international environment as far as oil is concerned isn't particularly favourable both on the price side and on the quantity side. And let me perhaps even worsen that on the quantity side, any analyst who has looked at Nigeria's oil production over the last 30 years or there about, will discover one interesting parameter or one interesting characteristics, and that is, in the year ahead of an election Nigeria's crude oil production goes down; and as I keep explaining, no self-respecting militant will breach oil pipelines after an election," Salami said.
To manage shortfalls that may arise from funding the budget, the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) urged that government begins to create contingency plans to source alternative non-debt funding for its budget expenditure.
The cartel is broadly on track to keep markets balanced this year, even though demand for its crude will be lower than previously thought, the IEA's report indicated. OPEC pumped about 30.8 MMbopd in January, just above the 30.7 MMbpd required on average in 2019.
Estimates for how much crude is needed from OPEC were lowered by 300,000 bpd from last month's assessment amid surging supplies from its rivals, driven by the U.S. shale boom.
American supply growth this year will exceed Venezuela's total output, the IEA said, another signal that OPEC's efforts to buoy prices may ultimately prove self-defeating.
Meanwhile, agency reports show that Nigeria is about to ship the first cargo of crude oil from a new deposit about 90 mi off its coast.
The 1 MMbbl consignment, which will head toward the Dutch port of Rotterdam, comes at a tricky moment for the West African country, given a pledge it has made to OPEC and other oil producing countries to help them avert a glut of crude.
The tanker, the Achilleas, will export from a mooring linked to the Total SA-operated Egina field. When fully up and running, the European oil company anticipates flows reaching about 200,000 bopd.
The kind of crude is exactly the variety the oil market needs, but is also the kind that OPEC doesn't. It has an API gravity of 2.73° degrees, making it a so-called medium grade, and a very low sulphur content of 0.165%.
That will make it invaluable for making fuels that comply with International Maritime Organisation rules to restrict shipping's sulphur emissions starting next year.
The extra barrels come just as the country is supposed to be lowering its output by 53,000 bopd in the first half of this year as part of a wider initiative by OPEC and allied nations to restrict collective supplies. It's supposed to pump about 1.685 MMbopd in the first half of 2019. In January, it averaged 1.792 MMbopd, according to OPEC figures.
The term deal will help cut IOC's dependence on OPEC crude, said Sri Paravaikkarasu, head of east of Suez oil for consultants FGE in Singapore. "Lots of geopolitical issues are going around. We expect lots of volume going away from Venezuela, west Africa and Iran, so it makes sense to have guaranteed term supplies from the U.S., where crude production is increasing," she said. "There is a push for diversification everywhere. South Korea is giving a freight rebate for non-Middle East crude imports," she added.
OPEC in its latest report stated: "Total world oil demand growth in 2018 is estimated at 1.47 mb/d, for an average of 98.78 mb/d for the year. For 2019, oil demand growth is forecast at around 1.24 mb/d, slightly lower than the previous month's assessment by 0.05 mb/d to reach an average of 100.00 mb/d. The downward revision is mainly an outcome of lower economic expectations in 2019 for the OECD Americas and Europe, as well as Latin America and the Middle East.
"Non-OPEC oil supply growth in 2018 was revised up by 0.11 mb/d from the previous month's report, mainly due to adjustments for US, Canada, Malaysia, China and UK supply, and is now estimated at 2.72 mb/d, with total supply averaging 62.17 mb/d for the year. Key growth drivers in 2018 were the US with 2.24 mb/d, along with Canada, Russia, Kazakhstan, Qatar, Ghana and the UK, while Mexico, Norway and Vietnam showed the largest declines".