Understanding the interplay between Bonny Light, the OPEC Reference Basket (ORB), Brent and West Texas Intermediate (WTI) is crucial for navigating the complexities of the global oil market, and this analysis aims to equip you with valuable insights.
This write-up examines December 2023 oil price trends with a specific focus on Bonny Light, WTI, Brent, and the OPEC Reference Basket. By unraveling these trends, we aim to shed light on the potential outlook for January 2024, offering valuable insights for those navigating the complex terrain of the oil market.
Bonny Light Performance
The price of Bonny Light crude oil exhibited significant volatility throughout December, ranging from a high of $82.92 per barrel to a low of $74.48 per barrel.
Despite the fluctuations, the price trended slightly upward over the month, closing at $79.40 per barrel, a 2.4% increase from the opening price of $81.09.
The most notable price swings occurred around December 6th and 14th, with drops of over $4 per barrel followed by sharp rebounds within a few days.
The price stabilized somewhat towards the end of the month, hovering around $80 per barrel before ending with a slight dip.
Data Source: Central Bank of Nigeria (CBN)
Year-on-Year Analysis of Bonny Light Performance
Notably, the fluctuations were quite pronounced, with variations both upwards and downwards within relatively short periods. The prices of Bonny Light crude exhibited notable fluctuations over the past year, indicating a dynamic and somewhat volatile market.
Starting in December 2022 at $79.8/bbl, there was a significant increase to $89.78/bbl by January 2023. There were fluctuations in the following months, hitting a low of $76.91/bbl in May 2023.
However, the market showed signs of recovery as prices began to climb again. From June 2023 onward, there was a gradual but steady increase, reaching $98.16/bbl in September 2023. By October 2023, there was a decline of $3.24 to $94.92/bbl.
Bonny Light prices went further down by a significant $9.27 (10.82%), reaching $85.65/bbl by November 2023.
By December 2023, prices dropped further, decreasing by 7.62% to $79.12/bbl.
Data Source: Central Bank of Nigeria (CBN); US Energy Information Administration
Bonny Light Nigeria crude saw a slight year-on-year decline of about 0.85% between December 2022 and December 2023, decreasing from $79.8/bbl to $79.12/bbl.
WTI and Brent, when compared to Bonny Light, showed a quite similar trend at various prices. They both decreased significantly over the past year.
Prices for WTI decreased by 5.94% year over year between December 2022 and December 2023, from $76.44/bbl to $71.9/bbl.
Brent also experienced a 4.07% year-over-year decline, decreasing by $3.29 from $80.92/bbl to $77.63/bbl.
The OPEC Reference Basket (ORB)
The OPEC Reference Basket (ORB) is a weighted average of the spot prices of 13 crudes — Saharan Blend (Algeria), Girassol (Angola), Djeno (Congo), Zafiro (Equatorial Guinea), Rabi Light (Gabon), Iran Heavy (Iran), Basrah Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Arab Light (Saudi Arabia), Murban (United Arab Emirates), and Merey (Venezuela).
Over the course of the year between December 2022 and December 2023, the prices for ORB in the period exhibit fluctuations. Year-on-year, the ORB price had a change of about 0.85%, a decrease of $0.68/bbl.
The ORB price was at $89.73/bbl in November 2022 and declined to $79.68 by December 2022. A recovery began in January 2023, pushing it up to $81.88 by February.
The first half of 2023 saw significant fluctuations, with prices ranging from $75.19 to $84.13 per barrel. In April 2023, OPEC agreed to cut production due to global economic slowdown concerns and the potential impact on oil demand.
The cut significantly impacted oil prices, which remained higher than before due to OPEC adhering to its production quota and the global economy showing improvement, which boosted oil demand. The effect of this made prices decrease notably to $75.82/bbl by May 2023.
Prices surged in the third quarter, reaching a peak of $94.60/bbl in September. This increase was fueled by robust demand, supply constraints, and concerns about potential supply disruptions due to geopolitical events.
Prices moderated in the fourth quarter, falling to $79/bbl in December. This softening was attributed to several factors, including easing supply concerns, a stronger US dollar, and fears of a potential global recession.
Data Source: OPEC
Comparatively, Bonny Light, which had a price per barrel of $79.12/bbl, was the most costly of the four crude oil benchmarks examined in this report for December 2023.
The ORB price followed the same trends as Brent Crude but with slight variations due to differences in the composition of the two benchmarks. WTI typically trades at a discount to ORB due to its lighter and sweeter crude composition.
Data Source: Central Bank of Nigeria (CBN); US Energy Information Administration; OPEC
January 2024 Outlook
The outlook for Bonny Light crude oil prices in the near term remains uncertain, as the factors influencing its price are subject to change. While December indicated relatively stable demand, global economic performance and potential recessions can quickly impact oil consumption. Domestic issues like pipeline disruptions or production slowdowns can also affect output and revenue.
In the 2024 Budget, President Bola Tinubu [GCFR] announced a conservative oil price benchmark of $77.96 per barrel and an estimated daily oil production of 1.78 million barrels per day, based on a thorough evaluation of global oil market trends.
Predicting the outlook in January 2024 based solely on the President’s conservative oil price benchmark and daily production estimate is challenging due to the numerous internal and external factors influencing it.
However, we can discuss the potential implications and offer some possibilities for January. Some indicators that suggest a possible outlook in January 2024 are:
- The $77.96/barrel benchmark sets a lower bar for revenue expectations, potentially providing a buffer against unexpected price drops.
- Maintaining a consistent daily production level of 1.78 million barrels facilitates predictable revenue flow and budget planning.
- Bonny Light ended December 2023 near the benchmark price, suggesting potential stability if market conditions remain similar.
Some possible scenarios that could occur are:
- Stable prices: If global demand remains stable and no major disruptions occur, Bonny Light prices could stay around the benchmark, potentially even exceeding it slightly due to seasonal energy demands.
- Downward pressure: Continued economic concerns or significant oil releases from reserves could push prices below the benchmark, impacting government revenue projections.
- Short-term spikes: Geopolitical events or supply chain disruptions could cause temporary price spikes, potentially exceeding the benchmark but likely not sustained due to the conservative production estimate.
Overall, predicting January 2024 Bonny Light definitively is not possible, but considering both the optimistic and challenging factors paints a picture of potential stability with the possibility of moderate fluctuations in either direction.
It’s important to remember that this is just an initial analysis based on limited information. More detailed data and ongoing monitoring of market trends and geopolitical developments will be crucial for forming a more precise outlook as January progresses.
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