Oil price rose above $100 a barrel amid talks of output tightening to support prices in the case of a potential Iranian crude deal and the prospect of a drop in U.S. inventories.
On Wednesday, the Energy Information Administration estimated a draw in oil inventories of 7.1 million barrels for the week to August 12 from 5.5 million barrels reported for the previous week.
At 10.45 GMT+1, Brent crude futures, an international oil benchmark, went up by 1 percent to $101.2 a barrel, while West Texas Intermediate oil futures rose by $0.98 to $94.66.
Abdulaziz bin Salman, Saudi Arabia’s energy minister and de facto leader of the Organisation of the Petroleum Exporting Countries (OPEC), had hinted at the possibility of the group cutting supply to correct a recent oil price decline.
In his comments on Monday, the Saudi minister said the paper and physical oil markets had become “disconnected”.
Vandana Hari, founder, Vanda Insights, an oil market analysis provider, said: “While Abdulaziz bin Salman’s comment may have achieved more than putting a floor under crude prices, we expect it to follow the law of diminishing returns unless it is followed up by more signals or action from OPEC+ to restrain output”.
The soaring oil prices may not translate to bolstered export earnings for Nigeria as the country is producing below its OPEC quota of 1.826 million barrels per day.
Last month, Nigeria’s crude oil production decreased to an average of 1.08 million barrels per day (bpd) from 1.16 million the previous month.
On Wednesday, Mele Kyari, group chief executive officer (GCEO), Nigerian National Petroleum Company (NNPC) Limited, said the country can produce 2.1 million barrels.
“We had the capacity to do 2.1 million. You can technically say that you have lost about 700,000 barrels of oil per day of production. But it doesn’t mean 700,000 bpd are stolen,” Kyari said.
“What in reality happens is that when those stealing take place, we probably lose up to 200,000 bpd of direct losses to thieves. And beyond this, once you have this infraction getting to a level we cannot manage, in some instances, some of the pipeline losses get up to 80 percent to 90 percent loss at one point.”
