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Angola: Oil Output up For the First Time Since 2015, Oxford Economics Reveal

Angola: Oil Output up For the First Time Since 2015, Oxford Economics Reveal

Consultancy Oxford Economics has revised its forecast for oil production in Angola, anticipating that the country will be able to pump 1.18 million barrels a day this year, increasing production for the first time since 2015.

“We forecast oil production in Angola to rise to 1.18 million barrels a day in 2022, up from 1.13 million barrels in 2021, but the balance of risks is negatively imbalanced due to the possibility of further technical problems and supply chain disruptions,” the analysts wrote.

In a commentary on the May figures sent to investors and to which Lusa had access, the Oxford Economics analysts wrote that China, which accounted for 70% of Angola’s exports last year, will be a determining factor in the evolution of Angola’s oil revenues this year.

“The confinements related to the Ómicron variant have adversely affected oil exports, which has forced Sonangol to sell shipments at a large discount,” the analysts point out, stressing that Russia is also necessary for the evolution of Angola’s oil exports, which are worth about 90% of the total.

“Angola faces tough competition from China, which may put further pressure on Angolan oil prices; Russia is selling cheap oil in a context of an embargo on Russian oil by other countries, and in May, Russia already replaced Saudi Arabia as the largest supplier of oil to China,” Oxford Economics says.

May oil production was down slightly in Angola, but in total, for the first five months, the country managed to pump 1.17 million barrels per day on average, which represents a 1.9% increase compared to the January-May 2021 period, which had a positive impact on public finances and the exchange rate.

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“More stable production and high oil prices have led to a flow of petrodollars last year, which has improved Angola’s exchange rate and sovereign credit quality; the Angolan currency has traded at around 433 kwanzas per dollar in recent days, which represents a sharp reversal from the worst period in November 2020, when a dollar was worth 660 kwanzas,” writes consultancy Oxford Economics.

Even though production is at low levels, especially when compared to the past decade, when Angola reached pumping almost 1.8 million barrels per day, the level of revenues is historically high due to international crude prices.

“Statistics from Angola’s Finance Ministry continue to show a great improvement in oil revenues, mainly due to high prices; cumulative oil revenues in the first five months of 2022 rose 89.2% compared to the period between January and May 2021,” the analysts said, noting, nevertheless, that “the average price of Angolan oil fell from US$119.5 per barrel in April to US$63 per barrel in May, due to the impact of reduced Chinese demand, originated by the confinement imposed by the Covid-19 pandemic.”

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