Nigeria, Africa’s biggest oil-producing country, recorded 80% compliance in OPEC June oil production cut, coming sixth in terms of compliance with set target cut, a new report shows.
The production cut agreed by Organisation of Petroleum Exporting Countries (OPEC) and its allies is aimed at boosting crude oil prices.
According to the UK-based Energy Intelligence shipping data, Nigeria recorded a compliance level of 80 percent with a production cut of 333,000 bpd, leading to a total production of 1.49 mbpd in the month of June.
Apart from Algeria which continued with its stellar compliance with 104 percent production cut, and Nigeria which recorded 80 percent compliance, Angola and Gabon were the only other African OPEC states that cut production compared to May, Energy Intelligence said.
The OPEC+ restrictions initially agreed in April required Nigeria to pump no more than 1.41 million barrels a day in May and June, and 1.50 million in the second half of the year.
“Definitely by the end of June, we’ll see full compliance from Nigeria,” Mele Kyari, managing director, Nigerian National Petroleum Corporation (NNPC), said in a Bloomberg television interview. It would happen in the first half of July “in the worst-case scenario”, he said.
Over the past 10 days the country has been cutting more than required under the OPEC+ pact, Kyari said.
Timipre Sylva, minister of state for petroleum resources, said in an Instagram post on June 2 that Nigeria was pumping 1.41 million barrels a day, in line with its OPEC+ target for May and June. But it implemented only 52 percent of the designated reduction last month, when it pumped an average of 1.61 million barrels a day, he said.
Also, data from Energy Intelligence noted that core Mideast gulf members, Saudi Arabia, the United Arab Emirates and Kuwait all made good on pledged additional voluntary cuts in June.
Saudi Arabia, the group’s biggest member, cut back by 3.5 million barrels a day to 7.49 million in June, fully implementing its additional voluntary reduction. Fellow Persian Gulf exporters Kuwait and the United Arab Emirates met their OPEC-mandated targets, but fulfilled only a small part of the extra curbs with compliance level of 112 percent and 120 percent, respectively.
Tough to comply
Abuja has had a dismal record in delivering its share of the OPEC+ production deal that had promised to reduce output by 9.7 million barrels of crude oil per day.
Full compliance will be tough for the Nigerian government, given its sheer reliance on revenue from oil exports. The central bank has already devalued the naira, the local currency, twice this year. The economy is forecast by the World Bank to contract 3.2 percent in 2020, which would be its worst performance since the 1980s.
Crude oil received an unusual catalyst from OPEC and its major allies who complied with the production cut agreement, though some oil traders and experts warned that the bullish momentum might run out of steam.
International oil prices have more than doubled since late April to about $40 a barrel, thanks to OPEC+ reining in supply and fuel demand recovering in countries such as China. The coalition’s accord will keep crude at about $42 to $45 a barrel by the end of the year, Kyari told Bloomberg TV.
The discount applied to Nigerian crude exports versus Brent, the international reference price, will probably disappear by the end of July, he added.
Yet the market’s journey back to pre-crisis conditions will be slow. Global oil demand probably won’t reach levels seen before the pandemic until the third quarter of 2021, he predicted.
While some of Nigeria’s assets can produce with oil prices below $30 a barrel, the country is insisting that partners and suppliers cut costs “by at least 30 percent to 40 percent”, he said. That’s with the aim of more than halving average production costs to $10 a barrel by the end of 2021, he said.