IEA: Demand for Nigeria’s Crude Oil Set to Decline

Minister of Petroleum, Mrs Dizeani Allison Madueke

The International Energy Agency (IEA) has predicted a decline in demand for Nigeria’s oil this year, partially due to the recent protests that affected the country's energy sector.

In its just-released monthly report, the IEA said the nation was on the watch list for 2012, with oil product demand likely to fall, at least in the first quarter of the year.

"Nigeria is on the watch list for 2012, with oil product demand likely to fall, at least in the first quarter of the year”, the IEA said.
The energy watchdog added: "Persistent industrial disputes, of the kind seen in January, could further reduce forecasts, not just for oil demand but also for economic growth in general."

Although the agency sanctioned Nigeria government’s plan to remove petroleum subsidy but cautioned against the effects its total removal would have on Nigerians. "In hindsight, a more gradual process might have been advisable," the IEA stated.

The agency had cut its forecasted oil demand growth for 2012 by 200,000 barrels per day (bpd) to 1.1 million bpd citing “clear signs of economic weakness”, that had already seen year-on-year demand in Q4 of 2011.

It warned that mild weather, high oil prices and a rising likelihood of a global recession would depress oil demand in 2012. “Oil demand is falling for the first time since the global economic crisis of 2008-2009, the IEA said in its monthly report.

According to the IEA, "Two inherently destabilising factors are interacting to give an impression of price stability that is more apparent than real. The first is a rising likelihood of sharp economic slowdown, if not outright recession, in 2012.
"The second factor, which is counteracting bearish pressures, is the physical market tightening evident since mid-2009 and notably since mid-2010".

The Paris-based agency, which advises industrial countries on energy policy, cut its global oil demand estimates as the threat of the euro zone debt crisis and restricted private sector credit remained.

Tensions with Iran over its nuclear programme, together with worries about Nigerian and Iraqi supplies had kept prices above $100 a barrel. But the agency noted that a potentially reduced gasoline demand from Nigeria could still provide further challenges ahead.