The price of Nigerian crude oil moved closer to the federal government’s benchmark following renewed drone attacks on oilfields in Iraq. This marks the fourth such of incidents, fuelling concerns over potential supply disruptions and underscoring the instability plaguing the Middle East.
Nigeria’s major crude grades – Bonny Light, Brass River, and Qua Iboe – were sold at $72.50 per barrel on Friday, trailing the FG’s benchmark by $2.50.
Crude output in Iraq’s Kurdistan region has fallen by between 140,000 and 150,000 barrels per day – over half of its typical daily production of 280,000 barrels.
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Explosive-laden drones struck the Tawke and Peshkabir fields operated by DNO ASA, as well as Dohuk. A separate strike set the Sarsang field, managed by HKN Energy, ablaze, prompting a regional production halt. While no group has officially claimed responsibility, Iran-backed militias are widely suspected of orchestrating the attacks on Iraqi Kurdistan’s oil assets.
The global crude oil market remains supported by seasonal demand. Average consumption in the first half of July reached 105.2 million barrels per day, a year-on-year increase of 600,000 bpd, meeting market forecasts.
Nigeria is targeting a 25 percent boost in its OPEC+ crude oil quota, in line with the group’s guidelines.
Bashir Ojulari, the Nigerian National Petroleum Company Limited (NNPCL) chief, expressed support for raising Nigeria’s production cap from 1.5 million to 2 million barrels per day, ahead of OPEC+ discussions on setting 2027 production limits.
Persistent issues such as crude oil theft and pipeline vandalism have allowed Nigeria to occasionally surpass its 1.5 million bpd limit. Although crude exports account for 90 percent of Nigeria’s foreign exchange (FX) earnings, these challenges have hindered sustainable increases in output beyond 1.2 million bpd.
According to data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s average crude oil output in June exceeded the 1.5 million bpd OPEC cap for the second time this year.
NUPRC reported that Nigeria’s crude production stood at 1,505,474 barrels per day, equivalent to 100.4 percent of its OPEC quota. Total crude and condensate output reached approximately 1.7 million bpd, an improvement from May’s 1.65 million bpd.
Oil and fuel demand in West Africa has surged following the launch of the 650,000 bpd Dangote Refinery, which commenced full-scale operations in late 2022.
Ojulari noted the refinery’s contribution to establishing new fuel demand centres in Nigeria, emphasising the necessity of unrestricted crude production to satisfy domestic consumption needs.
ExxonMobil plans to invest $1.5 billion in deepwater oil and gas exploration off the Nigerian coast. Additionally, Shell and TotalEnergies have outlined plans to ramp up production from Nigerian-led projects over the next two years.
Shell expects output from its Bonga North deepwater oilfield to begin by 2027, while TotalEnergies targets first gas production from the Ubeta gas field within the same timeframe.
Fears over summer fuel demand, combined with drone attacks in northern Iraq, have driven up seasonal oil demand and market anxiety over global crude supply.
Brent crude futures rose to $69.81 per barrel, with West Texas Intermediate priced at $68. Traders are responding to geopolitical uncertainty by increasing activity in oil futures and options markets.
Open interest and trading volumes in crude oil derivatives have reached record highs, highlighting heightened volatility and strong demand for oil contracts.
US crude holders are trying to hedge against price fluctuations, while some traders are re-entering the market after a year-long hiatus, betting on renewed price movement.
Brent crude has averaged $70 per barrel in the first half (H1) of 2025, oscillating between $60 and $85. Meanwhile, US crude inventories have declined, with export volumes set to rise.
Asian demand has recovered as refineries restart operations following maintenance work during the seasonal peak. Analysts believe tight fundamentals will support prices through the current quarter, with supply improvements expected towards year-end.
However, uncertainty surrounding U.S. trade tariffs, unlikely to be resolved before August 1, continues to weigh on global oil markets.
Major oil producers are also preparing to phase out output cuts after the seasonal demand peak in the Northern Hemisphere, potentially flooding the market with additional supply. As a result, both Brent and WTI posted losses of over one percent for the week.
Two energy officials confirmed that oil production in Iraq’s Kurdistan region has been reduced from around 280,000 barrels per day to between 140,000 and 150,000 barrels daily, following the latest drone strikes.
