Last week, the Organisation of Petroleum Exporting Countries (OPEC+) members met for the 32nd joint ministerial meeting amid sanctions on Russia and tempestuous global energy prices. Given the adverse impact of volatility and the decline in liquidity on the current oil market and the need to support the market’s stability and its efficient functioning OPEC+ agreed to adjust the production level in October downwards by 100,000bpd (reversing the 100,00bpd hike in the prior month), shocking market participants. In response to the decision, Brent Crude oil prices rallied that day by 2.9% to print at $95.74/bbl. (currently $94.04/bbl.).

At the meeting, OPEC+ reiterated the continued commitment of the participating producing countries in the "Declaration of Cooperation" (DoC) to a stable market, the mutual interest of producing nations, the efficient, economical, and secure supply to consumers, and a fair return on invested capital. Notably, world oil demand is foreseen to rise by 3.1mbpd, a downward revision of 0.3mbpd from the prior forecast. Total oil demand is projected to average 100.03mbpd on the back of stable economic growth in many high-consumption countries. Non-OPEC liquids supply growth in 2022 is forecast at 2.1mbpd to an average of 65.8mbpd, broadly unchanged from the previous assessment.

Going forward, the outlook for global oil prices will remain elevated, although we expect oil prices to continue their bullish run in the short term as reins on global supply remain. In the long-run, fears of economic recession and rising inflationary pressures could dampen demand. The decreased OPEC+ agreement output for Nigeria means that the monthly quota falls to 1.826mbpd in October (previously 1.830mbpd in September). However, OPEC's monthly quota remains way above the nation’s current production levels, which was reported at 973.3kbpd in August 2022, according to the Nigerian Upstream Petroleum Regulatory Commission, lower than the 1.2mbpd averaged in the first seven months of 2022. Structural constraints such as oil theft and pipeline vandalism) continue to hamper CAPEX investments in the upstream oil and gas sector. These will continue to lead to increased deficit financing due to the increased debt financing stemming from poor budget performance. Also, we expect to see the continued illiquidity in the I&E window due to ailing dollar receipts.