FRI, APRIL 10 2020-theG&BJournal- Nigeria joined OPEC+ in the brutal but necessary oil production cut aimed at saving the oil industry facing the biggest crisis in its history.
OPEC countries signed up to the production cuts in a virtual meeting of G20 energy ministers on Friday, with the US Energy Secretary Dan Brouillette among the global energy leaders participating through webinar.
The Minister of State for Petroleum Resources Timipre Marlin Sylva announced Nigeria’s decision to join the cut-agreement, curtailing supply by up to 10 million barrels per day between May and June 2020, 8 million barrels per day between July and December 2020 and a further 6 million barrels per day from January 2021 to April 2022 respectively.
‘’Based on reference production of Nigeria of October 2018 of 1, 829 m/pd, of dry crude oil, Nigeria will now be producing 1. 412 mb/pd and 1.579 mb/pd respectively for the corresponding period in the agreement’’, Sylva said.
According to Sylva; ‘’It is expected that this historic intervention when concluded will see crude oil prices rebound by at least $15 per barrel in the short term, thereby enhancing the prospect of exceeding Nigeria’s adjusted budget estimate that is currently rebased at $30 per barrel and crude oil production of 1.7 Million Barrels per day. The price rebound may translate to additional revenues of not less than $2.8 Billion Dollars for the Federation.
It is therefore pleasing to note that despite the production curtailments that this historic agreement will entail, all planned industry development projects will progress as they will be delivered after the termination of the 9th OPEC/Non-OPEC Ministerial Meeting Agreement on adjustments in April 2020.’’
Timipre Marlin Sylva said last week that the driving force of Nigeria’s OPEC policy is first the stability of the national economy as well as the stability of the global economy which is heavily dependent on OPEC and its strategic partners, popularly referred to as OPEC+.
‘’Nigeria, like the rest of the world, has been hit by the Global Pandemic, COVID-19, and is prepared to join the rest of the world in making the necessary sacrifices needed to stabilize the crude oil market; and to prevent what is likely to be a major global economic meltdown,” said Sylva.
‘’It explains Nigeria’s decision today,’’ our source said.
The US is also said to be part of the agreement after it caved in to OPEC demands to regulate its production.
Mexico earlier threatened to spoil the party but agreed Friday after the country’s president, Andres Manuel Lopez Obrador said he had agreed with the US President Donald Trump for compensation for what Mexico could not add. Mexico initial proposal was for 100, 000 cut only after OPEC demanded it cut production by as much 400, 000 b/pd.
‘’But that will be as far as they can go for now. The brutal consequences of the COVID-19 pandemic, which has already caused huge demand destruction still has a say in this matter, and I don’t see how OPEC is going to get through this without hitch,’’ one oil watcher told theG&BJournal in Lagos. ‘’And I don’t think that it will be enough to influence oil price so much.’’
HE Mohamed Arkab, Algeria’s Minister of Energy and President of the OPEC Conference 2020 set the tune for Thursday’s meeting.
He said: ‘’The impact on the oil market is also unprecedented. Large-scale oil demand destruction, and the resulting massive supply and demand imbalance, have the potential to fill global storage capacity quickly and force production shutdowns. The adverse impact on oil exporting country revenues is huge, at a time when these countries are facing the human tragedy of the pandemic and the resulting economic downturn.’’
NJ Ayuk, Executive Chairman of the African Energy Chamber, supported the deal and advocates for further cuts.
“The OPEC deal is a good one. We can work with it for now. African countries will not recover from COVID-19 and the associated economic difficulties without a strong energy sector. African businesses and workers will be happy to see the end to the price war and to maintain an industry that meets their hopes and aspirations. A global cut would be better and everyone needs to put some skin in the game, especially our friends from the US, Canada and Norway.”
Brent crude averaged $55.70/barrel in February before the oil price war and the impacts of COVID-19 hit. Ahead of the meeting on Thursday, Brent crude was trading at $33.41 and WTI at $25.92. Both Brent and WTI have reached their lowest level in years, with Brent hitting $22.76 per barrel in March, its lowest price since November 2002.
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