Can oil sustain price rally?

The global oil market is currently experiencing a delicate balance of supply disruption risks and demand fears. Oil prices have been edging higher due to escalating tensions in the Middle East, counteracting concerns about a surprise build-up in U.S. stockpiles. At the same time, the Nigerian National Petroleum Company (NNPC) has revealed the discovery of 165 illegal refineries across the Niger Delta region in just one week. These developments highlight the complexities and challenges faced by oil-producing nations, including Nigeria. Temitope Kolade, Senior Manager of Oil, Gas, and Power at Andersen Nigeria, shed light on the factors influencing oil production and price movements during an exclusive interview with CNBC Africa. Kolade emphasized the significant role of geopolitical tensions in driving oil prices. He noted that conflicts in regions like the Middle East not only disrupt supply routes but also create uncertainty that impacts market sentiment. Additionally, announcements of supply cuts by organizations like OPEC further contribute to price fluctuations. The sustained high oil prices, currently hovering around $82 to $83 per barrel, indicate a positive outlook for the market. Kolade projected a continued uptick in prices throughout 2024, with stabilization expected in 2025 as production levels across OPEC countries and beyond adjust to meet demand. However, amidst these optimistic forecasts, the challenges facing Nigeria's oil industry present a critical concern. The proliferation of illegal refineries in the Niger Delta region poses a significant threat to production levels. The discovery of 165 such refineries underscores the rampant issue of sabotage and theft within the sector. Kolade emphasized the need for decisive action to address these security risks, suggesting that public disclosure of perpetrators and increased technological interventions could help combat the problem. The impact of insecurity on investments in Nigeria's oil industry cannot be understated. Reports of widespread theft and vandalism create a sense of instability that deters potential investors. Kolade highlighted the importance of government commitment and political will in tackling these challenges effectively. He called for a collaborative approach involving stakeholders and local communities to restore confidence and ensure sustainable growth in the sector. In conclusion, addressing the security threats and operational challenges in Nigeria's oil industry will be crucial for unlocking its full potential. By addressing issues of theft, vandalism, and illegal refineries, the government can create a conducive environment for investments and promote long-term stability in oil production. As global oil prices continue their upward trajectory, Nigeria stands at a crossroads, poised to harness its resources effectively or grapple with persistent obstacles that impede progress.