Oil prices are crucial for global stability, international relations, environmental sustainability, and livelihoods. High prices can lead to trade imbalances, impacting foreign exchange reserves, currency values, and economic equilibrium.
They also affect transportation costs, goods transport expenses, and household budget constraints. Mastering oil price dynamics is essential for navigating the future of our interconnected world.
Based on a report by OPEC, the daily crude oil production across OPEC-13 averaged 27.90 million bbl/day in October 2023, marking an increase of about 80K bbl/day compared to the previous month.
This rise predominantly stemmed from heightened production in Angola, IR Iran, and Nigeria. However, during the same period, crude oil output experienced a decline in Libya, Saudi Arabia, and Kuwait.
This write-up examines October 2023 oil price trends, focusing on Bonny Light, WTI, Brent, and the OPEC Reference Basket, and offers insights into the potential outlook for November 2023.
Bonny Light Performance
The Bonny Light crude oil price serves as a vital indicator, reflecting both global and local factors influencing the Nigerian oil industry. The Bonny Light crude oil price in October 2023 was volatile, with a high of $99.33 and a low of $91.69.
The average price for the month was $94.68. The Bonny Light price began the month at $99.33 and fell to $92.42 on October 6. The price then rebounded to $97.75 on October 13 before falling to $91.69 on October 24. The price closed the month at $93.8.
Year-on-Year Analysis of Bonny Light Performance
Prices started strong at $93.19 in September 2022 but saw a notable dip to $79.80 by December 2022. A gradual recovery began in January 2023, reaching $86.04 by February 2023.
Prices further improved to $86.59 in April but experienced a slight decline to $76.91 by May 2023. Prices regained strength, reaching $89.29 in August 2023. This uptrend reflects efforts by major producers to stabilize the market and ongoing economic recovery worldwide.
The Bonny Light crude oil price in October 2023 stands at $94.92, which is a 3.3% decrease from the previous month.
Data Source: Central Bank of Nigeria (CBN); US Energy Information Administration
Bonny Light Nigeria crude saw a 1.83% year-on-year decline between October 2022 and October 2023, decreasing from $96.69/bbl to $94.92/bbl.
WTI and Brent, when compared to Bonny Light, showed comparable trends at various prices. They both decreased over the past year, but not as much as Bonny Light.
Prices for WTI decreased 1.95% year over year between October 2022 and October 2023, from $87.55 per barrel to $85.84 per barrel.
Brent also experienced a 2.73% year-over-year decline, decreasing by $2.55 from $93.33/bbl to $90.78/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).
Analyzing the data for ORB from October 2022 to October 2023, we observe fluctuating prices. Year-on-year, the ORB price had a minor change of about 0.76%, a decrease of $1.8 per barrel.
The ORB price was at $93.62 per barrel in October 2022 and declined to $79.68 by December 2022. A recovery began in January 2023, pushing it up to $81.88 by February. Prices improved to $84.13 in April but decreased to $75.82 by May 2023.
Prices regained strength thereafter, reaching $87.33 and $94.60 in August and September respectively. In October 2023, the price stood at $91.78, reflecting a gradual decrease of about 3% from the previous month.
In April 2023, OPEC cut production through a voluntary agreement among its members to reduce output, in response to concerns about the global economic slowdown and the potential impact on oil demand.
The production cut had a significant impact on oil prices. In the following months, oil prices continued to fluctuate, but they generally remained higher than they had been before the production cut.
This was due in part to the fact that OPEC continued to adhere to its production quota. Additionally, the global economy showed signs of improvement, which helped to boost oil demand.
The ORB price in October 2023 was volatile, with a high of $95.72 and a low of $87.33. The average price for the month was $91.78.
The price began the month at $90.80 and rose to $95.72 on October 20. The price then fell to $87.33 on October 6 before rebounding to $91.68 on October 26. The price closed the month at $90.06.
Data Source: OPEC
Comparatively, Bonny Light, which had a price per barrel of $94.92, was the most costly of the four crude oil benchmarks examined in this report for October 2023. Compared to ORB ($85.84 per barrel), the second most costly benchmark, this is 9.57% more expensive.
Data Source: Central Bank of Nigeria (CBN); US Energy Information Administration; OPEC
November 2023 Outlook
The World Bank’s Commodity Markets Outlook for October 2023 suggests that the escalation of the Israel-Hamas conflict could lead to a significant increase in oil prices, potentially reaching $157 per barrel.
This could have a devastating impact on the global economy, especially on developing countries. The report outlines three scenarios: severe, where oil prices double to $157 per barrel; less severe, where they rise to $120 per barrel, and the most favorable scenario, where oil prices remain at current levels.
Anticipating precise numbers for November 2023 is difficult because of the intricate nature of the world’s oil markets. The global oil market is influenced by a complicated web of interrelated factors, making the prediction for crude oil prices unpredictable.
The factors that affected the price in October are likely to continue to be influential in the coming months. However, it is possible that the price could stabilize or even decline if supply and demand come into better balance.
Factors to keep an eye on are:
- The activities of the member countries of OPEC+, such as production quotas and supply adjustments, will have a significant impact on the price of oil globally.
- Issues with security: Domestic security concerns might have an impact on Nigeria’s oil production, especially in the Niger Delta area. Prices for Bonny Light could fluctuate as a result of any disturbances.
- Speculations: Speculations about future oil demand and supply can also affect oil prices.
- Geopolitical events: Geopolitical events, such as wars and political instability, can disrupt oil production and transportation, leading to price spikes.
- Supply and demand of oil: The fundamental factors of supply and demand will continue to play a major role in determining oil prices. An increase in demand or a decrease in supply can lead to higher prices, while a decrease in demand or an increase in supply can lead to lower prices.
