Drop in US oil demand hurts Nigeria's economy

America's oil demand continues to drop, presenting another challenge for Nigeria, a major supplier to that country. The fall in patronage of oil from Nigeria and other suppliers came just as prices have failed to climb above $ 40.
Nigeria has benchmarked $ 45 as oil price to finance the 2009 budget, which execution is based mainly on proceeds from oil. Fuel demand in the United States in four weeks, a report issued by the Energy Information Administration (EIA) showed, averaged 19.5 mm bpd, down 2.8 % from a year earlier.

As a result of the global meltdown, unemployment in the US has, according to the median estimate of experts ahead of Labour Department figures, climbed to 7.5 %. The payrolls fell by 530,000, the 13th consecutive decrease.
Nigeria is the world's eighth largest exporter of crude and is a key exporter to the US. Although the country's export capacity is now about 2 mm bpd, its total exports in 2006 reached an estimated 2.15 mm bpd, with approximately 1 mm bpd or 42 % shipped to the US. Additional importers of Nigerian crude include Europe (19 %), South America (7.6 %), Asia, and the Caribbean.

Despite shut-in production, major importers of Nigerian crude have experienced little to no decrease in imports over the past 15 months. The steady exports suggest that the new production capacity additions (approximately 545,000 bpd) have mostly offset shut-in production. Nigeria has six export terminals, including Forcados and Bonny (operated by Shell); Escravos and Pennington (Chevron); Qua Iboe (ExxonMobil), and Brass (Agip).
According to the International Crude Oil Market Handbook, Nigeria's export blends are light, sweet crudes, with gravities ranging from API 29-36 degrees and low sulphur contents of 0.05-0.2 %. Forcados Blend is considered one of the best gasoline-producing blends.

Despite the enormity of the country's export base, it has been exerting more efforts to expand its production level. Deepwater projects may represent the future of Nigerian oil production by allowing multinational operators to avoid security risks in the Niger Delta.
In a licensing round held in March 2005, Nigeria offered a total 77 deepwater and inland blocks. Beginning on April 3, 2007, the government opened a licensing round in which 44 blocks are being offered. A number of the blocks in that round were also offered in 2005.

Because of the continuous fall in the price of oil, the Organisation of Petroleum Exporting Countries (OPEC) decided on December 17 last year to trim production by 9 % beginning on January 1, 2009. The 12-member group pumped an average 28.565 mm bpd in January, down 1.05 mm from December, according to a Bloomberg News survey of oil companies, producers and analysts.
"The market is stuck in a sideways range as the impact of the OPEC production cuts conflicts with high stock levels and weak demand," said Christopher Bellew, senior broker with Bache Commodities in London.