Angola: Cabinda prices jump in October
The average price of Cabinda oil came in at USD 83.6 per barrel (pb) in October. This was up from September’s USD 74.5 pb, and marked a 12.2% increase month-on-month. Meanwhile, the price was up 108% over the same month a year prior, although the annual improvement benefited from a favorable base effect.
Oil prices rallied in October on the back of firming demand, as the global energy crunch saw power generating firms switch to oil from gas. Supply, however, rose on average among OPEC+ members. Output picked up pace particularly in Kuwait, Saudi Arabia, the UAE and Venezuela. Production of Angolan Cabinda oil also rose, from 1.08 million barrels per day (mbpd) in September to 1.10 mbpd in October. This offset reduced output in Nigeria and Gabon, among others.
Looking ahead, prices have fallen slightly so far in November, but have remained close to their October level. Next year, prices should average higher compared to this year amid the economic recovery, although the rally is forecast to lose some steam by end-2022. Turning to output, the production of Cabinda oil is expected to pick up pace next year as small blocks will come online and other fields continue to mature. However, output will remain markedly below pre-pandemic levels, weighed on by the impact of prior OPEC+ cuts and last year’s oil price slump.
Analysts at the EIU hold a bearish view on Angolan oil production, adding:
“Following the sharp drop in oil prices at the onset of the pandemic in 2020, many energy majors halted exploration and drilling activity […] as they sought to cut operational costs. […] The government aims to have 14 rigs operating by end2022 (a level not reached since 2015, when output was 1.8 mbpd, near its historic peak). We view this target to be unrealistic, and we expect activity in the sector to pick up more gradually. […] We believe that it will take time for increased exploration activity to translate into higher output and reverse the current trend of falling volumes at maturing fields. Accordingly, we expect oil output to continue to decline until 2023, with production of 1.07 mbpd, and then rise from 2024.”