6 December 2018

Nigeria: Opec Meets Thursday, Nigeria May Join Output Cuts

As the Organisation of Petroleum Exporting Countries (OPEC) meets today, there are strong indications that some delegates would want Nigeria and Libya to join the oil production cuts, which came into effect in January 1, 2017.

Nigeria and Libya were exempted from the deal as a result of the militancy in the Niger Delta and unrest in Libya, which had already impacted production in both countries.

Under the deal, which had been extended to cover the whole of 2018, OPEC and non-OPEC producers, led by Russia are cutting 1.8 million barrels of crude oil per day, as part of the efforts to remove the excess inventory in the global market.

Before the producers embarked on the cuts, excess crude in the market had led to drop in oil price to $27 per barrel in February 2016.

Delegates attending the OPEC meeting in Vienna told S&P Global Platts yesterday that they would demand that Nigeria and Libya should join the production cuts deal.

"We are hopeful that they will come around this time and understand that everyone has to cut together," an OPEC delegate reportedly said.

The delegate added that both countries had made significant improvements to their production since the current deal went into force in January 2017, and it was time for them to "contribute."

Production from Libya has surged by 520,000 bpd, or more than double, from the October 2016 baseline on which the 1.8 million bpd cuts were based, while Nigerian output has risen by 210,000 bpd, or 13 per cent, according to S&P Global Platts OPEC survey data, though both have had volatile swings.

Saudi Energy Minister Khalid al-Falih has in recent weeks travelled to Libya and Nigeria to press them on the exemptions, though no public commitments have been announced.

Falih, after meeting with Nigeria's Minister of State for Petroleum Resources, Dr Ibe Kachikwu, in Abuja last month, said some OPEC members "were complaining" in the summer that the two countries were "overproducing" and contributing to rising OPEC production.

"We have seen a great deal of stability and consistency, both operationally and, more importantly, in terms of security and bringing the sector back to normal," Falih said.

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