Brent, the benchmark of Nigeria’s crude oil moves closer to a seven-year high on Wednesday, selling $90.32 per barrel after some of the biggest oil-producing countries decided to stick to their planned output increase despite pressure from top consumers to raise production.
After its meeting on Wednesday, the Organisation of the Petroleum Exporting Countries and allies led by Russia, (known as OPEC+) which produces more than 40 percent of global oil supply, stuck to its target of monthly increases of 400,000 barrels per day (bpd).
The cartel blamed surging prices on the failure of consuming nations to ensure adequate investment in fossil fuels as they shift to greener energy.
On Wednesday, Brent crude was up $1.16 cents, or 1.3 percent, at $90.32 a barrel by 1303 GMT. While the U.S. West Texas Intermediate crude rose $1.28 to $89.48 a barrel.
At the meeting, Saudi Arabia’s energy minister Abdulaziz bin Salman again reiterated OPEC+ cautious approach when it comes to their output policy.
“Prudence as I’ve been preaching about is what saved us in OPEC+,” he said. “I belong to an experience that pushed me to be trying to be a prudent person, so prudence dictates that you have a bit of think here and a bit of think there, and make sure that you see in your radar and in your screen and this screen should be 360 and don’t allow yourself the liberty of cherry-picking because you don’t know who will evolve.”
Notably, analysts say OPEC’s cautious pace of supply increases of course runs counter to the prevailing view in Wall Street and the trading world of a tight global market.
“The group’s conservatism is a reflection of its outlook for the year, which continues to project surpluses every month,” said PVM Oil Associates analyst Tamas Varga,
Several OPEC+ sources also said prices had been pushed up by Russia-U.S. tensions. Washington has accused Moscow of planning to invade Ukraine, which Russia denies.
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Oil output increases are complicated by the fact that several OPEC members have struggled to meet even current monthly targets and lack the spare capacity to boost production any further.
For instance, Nigeria missed its crude oil output target for January 2022, pumping 1.46 million barrels per day against a target of 1.683 million as approved by OPEC.
According to OPEC’s report, Nigeria’s 1.46mbpd production in January was slightly higher than its 1.41mbpd December 2021 output, but the survey pointed out that OPEC struggled to pump at target due to the inability of members to meet their targets despite the rise in oil prices.
Nigeria’s struggling oil production is a huge concern for Africa’s biggest economy because the country’s three tiers of government rely on oil exports for some 90 percent of its foreign exchange and monthly allocation to meet their various obligations to 774 local governments scattered around the country.
Nigeria has the capacity to produce around 2.2 million to 2.3 million bpd of crude and condensate, but production has averaged only around 1.62 million bpd in 2021, according to Platts estimates
Many energy analysts predict that oil could soon touch $100 a barrel, even as electric cars become more popular and the coronavirus pandemic persists.
