from PEDRO AGOSTO in Luanda, Angola
LUANDA, (CAJ News) – ONE of the continent’s biggest producers of crude oil, Angola, is bracing up for the latest upheaval in the global market for the commodity.
The turmoil is projected to have an adverse effect on the economy overly-reliant on this extractive sector.
Oil prices have fallen by more than half since early this year due to the global coronavirus (COVID-19) pandemic and a price war between Saudi Arabia and Russia.
They are the largest world producers of oil.
The COVID-19 has slowed down global economic activity and demand for the commodity.
Angola, Africa’s second-largest producer of oil (behind Nigeria), may reduce its daily oil production by 348 000 barrels as of May 1.
This is within the auspices of an agreement reached last Friday by the Organisation of the Petroleum Exporting Countries (OPEC) and some countries outside the bloc to lower production to 11 million barrels of production globally.
Countries agreed to slash about 10 million barrels daily for the period May to June.
Angola is one of 13 OPEC nations.
Consequently, Southern Africa’s leading producer of oil is to reduce production to 1,1 million barrels/day.
Current production is at 1,4 million barrels/day.
Some 18 months ago, Angola had a daily production of 1,5 million barrels.
The sector is the lifeblood of the economy of the country that is also the biggest in Southern Africa by land size.
In the aftermath of the instability in the sector globally, the Angolan government of President Joao Lourenco has adjusted its 2020 state budget implementation rules.
This entails adjustments to the document that defines the state’s annual revenues and expenditure.
According to the cabinet, the intervention aims to make money accessible to budgetary units and dependent bodies.
This is anticipated to enhance services and sustain public needs.
The National Statistics Institute (abbreviated as INE) this week disclosed Angola recorded a fourth successive year of recession.
Gross domestic product (GDP) for the final quarter of last year was down 0,8 percent from the same period in 2018.
Nonetheless, the Extraction and Refining of Crude Oil and Natural Gas segment of the economy contributed 29,4 percent to GDP. It remains the most contribution by any sector, ahead of trade, construction and public administration, in that order.
James Chester, the Acting Chief Executive Officer of Africa Oil and Power, said while plummeting global demand for oil makes African oil exporters particularly vulnerable, Angola’s structural reforms since 2017 stand the country in much better stead to adapt and compete.
“The re-appointment of Minister of Mineral Resources, Petroleum and Gas, Diamantino Azevedo, earlier this month brings welcome stability,” Chester stated.
Siobhan Redford, an economist with Rand Merchant Bank (RMB), said the revival in the economy of China, initially the epicentre of COVID-19, could spearhead the resuscitation of the oil sector.
“Surely the pick-up in China’s economic activity, now getting to pre-COVID levels, would be seen as a positive development for oil, as well as demand for other commodities and thus their prices,” Redford said.
– CAJ News