Nigeria Defies Production and Export Expectations Amidst Conflicting Ceasefire Reports

Nigeria exported up to 500,0000 bpd more than what OPEC thought it had produced in May.

Production and exports in Nigeria are stronger than anticipated despite that country's civil unrest, and analysts are wondering if a one-month long ceasefire between government and militants in the oil-rich Niger Delta indicates that its troubles are finally coming under control.

Word of the ceasefire was followed by Brent crude slipping below $50 per barrel to $49.97, and there are conflicting reports about the temporary cessation of hostilities, with an oil ministry official claiming the agreement includes the Niger Delta Avengers (the most militant group in the region), and the Avengers denying it has been in any talks with the government.

Nonetheless, incoming Organization of the Petroleum Exporting Countries (OPEC) secretary-general Mohammed Barkindo said he has been told that Nigeria's oil production is beginning to rise, and that he is confident a "stable and permanent solution" to the hostilities will be found.

He did not say to what degree production is recovering.

As for exports, data from Windward and Thomson Reuters showed a far smaller drop from April to May than observers had predicted: while May production of 1.37 million barrels per day (bpd) was a 30 year low, exports for that month dropped by just 62,000 bpd to 1.67 million bpd, compared to 1.77 million bpd in April, as well as a rise in exports of grades including Bonga, Agbami, Antan, Amenam, Okwori, which helped to offset the losses.

The data indicates that Nigeria exported up to 500,0000 bpd more than what OPEC thought it had produced in May.

James Davis, head of crude supply at FGE Energy, has an explanation for the surprising figures: "It was the gains from small fields that offset declines from others.

"The disruptions in the fields that were out was pretty much what we expected; what we didn't expect was the marginal increases in other fields."

As for the near future, FGE believes the increase in Qua Iboe exports will be offset by further declines in Bonny Light and Brass River – but that the full ramifications of Nigeria's ongoing civil unrest remains unclear.

Helima Croft, head of commodities strategy at RBC Capital Markets, recently pointed out that militant attacks in Nigeria have reduced OPEC's daily output by 800,000 barrels and that the cartel doesn't need to do anything to rebalance the market: "Nigeria can balance this market: when Nigeria goes offline, they go offline for a long time."