The Organisation of Petroleum Exporting Countries (OPEC) may cut oil production output by as much as 1 million barrels per day when they meet tomorrow, some delegates said yesterday.
If the international oil cartel makes good the decision, it would be the largest cut since 2020 when the Covid-19 pandemic began.
The group is expected to make the resolution against the backdrop of falling oil prices and months of severe market volatility which prompted top OPEC+ producer, Saudi Arabia, to back production cuts.
But the decision may have little impact on Nigeria which has been unable to meet even the quota allocated to it by as much as 800,000 barrels per day, going by August data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
Last year, the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited (NNPCL), Mallam Mele Kyari, said Nigeria was most comfortable with an oil price of between $50 to $60. He hinged his reason on the argument that Nigeria's oil buyers may find alternatives if the price skyrockets.
OPEC+, which combines OPEC countries and allies such as Russia, has refused to raise output to lower oil prices despite pressure from major consumers, including the United States, to help the global economy.
But Prices have nevertheless fallen to below $90 per barrel from as high as $120 in recent months due to fears about the global economy and a rally in the United States dollar after the Federal Reserves raised rates.
"It may be as significant as the April 2020 meeting," a source said, referring to when OPEC+ agreed record supply cuts of around 10 million bpd, or 10 per cent of global supply, as the COVID-19 pandemic hit demand, Reuters implied.
A significant production cut is poised to anger the United States, which has been putting pressure on Saudi Arabia to continue pumping more to help oil prices soften further and reduce revenues for Russia as the West seeks to punish Moscow for sending troops to Ukraine.
Yesterday, the price of a barrel of West Texas International (WTI), crude oil had risen by nearly 4 per cent in the afternoon, with the price hovering at $82.35, while last week's low was set at $76 per barrel.
Before the current rebound occurred, however, the price of oil had been falling for four months in a row.
It fell in September to its lowest level since January 2022. Since the peak of the price, which occurred when the war in Ukraine began, oil prices have fallen by more than 40 per cent. But it seems that OPEC countries cannot afford such a big bump.
In the same vein, Nigeria's crude benchmark, Brent futures popped 4 per cent to $88.54 per barrel, far below the $120 mark it hit at some point months ago.
However, Nigeria may be little impacted by the cuts as latest industry data showed production hitting a record low of 972,394 barrels per day in August.
The development marked a new low in the over a year-long downward spiral in Nigeria's capacity to drill enough oil to boost its desperately needed foreign exchange even at a time that the commodity has continued to hover around a rarely seen price of $100.
The decrease below the 1 million bpd mark in production in August despite months of assurances of planned improvement by the Nigerian authorities, was more than 10 per cent compared to the July 2022 production of 1.083 million barrels per day.
THISDAY's checks showed that in June the country's production was 1.158 million bpd; it was 1.024 million bpd in May; 1.219 million bpd in April, 1.237 million bpd in March; 1.257 million bpd in February and 1.398 million bpd in January.
The quota given by OPEC to the country for the month of August was 1.826 million barrels per day, meaning that Nigeria under-produced to the tune of about 853,606 bpd last month.
The country has recently taken a rash of measures to curtail the oil theft menace, which so far appears to have defied all solutions.
A few of the measures include the renewed deployment of security personnel in the Niger Delta and the real-time monitoring of activities around the pipelines by the NNPCL.
In addition, the national oil firm has introduced the whistle-blower strategy as well as the handing over of a N4 billion monthly surveillance contract to ex-militant, Government Ekpemupolo, popularly known as Tompolo.
The federal government has variously blamed massive oil theft, vandalism of major assets, dilapidated infrastructure as well as declining upstream investment for its inability to drill more of the commodity.