The oil revenue of Nigeria is expected to rise on the back of Saudi Arabia and Russia’s planned production cuts for next month as the country’s production keeps improving in 2023, a BusinessDay analysis has shown.
Oil production in Nigeria has recorded a steady improvement since the beginning of 2023. According to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the country’s production averaged 1.45 million barrels per day. This includes crude oil, blended and unblended condensates.
Since the announcement by Saudi Arabia and Russia to cut production earlier in the week, Brent crude, the benchmark by which Nigeria is gauged, rose to $77.03 per barrel on Thursday, July 6, 2023.
Data obtained from the National Bureau of Statistics (NBS) showed that the largest economy in Africa earned N21 trillion ($45.6 billion) from crude oil sales in 2022. The amount increased by 46.41 percent last year from N14.41 trillion in 2021. Brent crude averaged $100.93 per barrel in the period.
Nigeria recorded N5.14 trillion from crude oil sales in the first three months of 2023, up from N4.9 trillion realised over the last quarter, according to NBS. This is despite a six percent decline in oil prices from $88.5 per barrel in the fourth quarter of 2022.
“The latest round of voluntary crude oil output cuts evidence the cooperation between heavyweight producers and allies Russia and Saudi Arabia,” said Abdulaziz bin Salman, the kingdom’s Energy Minister, on Wednesday.
He said Russia-Saudi oil cooperation remains strong as part of the OPEC+ alliance, which will do “whatever is necessary” to support the market.
In response to falling oil prices, OPEC+, a group comprised of the Organization of Petroleum Exporting Countries and allies including Russia, has been cutting oil output since November.
“In the last move this week, yes, we are all continuing with our voluntary cut, but again, part of what we have done with our colleagues from Russia was also to mitigate the cynical side of spectators about what was going on with Saudi Arabia and Russia,” he said.
According to Abdulaziz, the producers’ alliance will continue to closely support the market. “I will tweak what [former European Central Bank President Mario] Draghi was saying, we will do whatever is necessary. Not whatever it takes, whatever is necessary,” he said.
Meanwhile, according to Russian news reports, Alexander Novak, Russian Deputy Prime Minister, said his country will cut production by an additional 500,000 barrels per day in August.
The voluntary cuts are in addition to earlier cuts agreed to by the OPEC oil cartel, led by Saudi Arabia, and allied producers, led by Russia, to extend through next year.
However, they have provided little long-term support for oil prices, allowing US drivers to fill their tanks more affordably during the busy summer travel season and providing some relief to consumers worldwide from inflation.
Some have questioned whether Russia will honour its voluntary crude production decline pledges, given the ongoing opacity surrounding its refinery consumption and seaborne exports, which have been rejected in Europe since December and rerouted to Asia.
According to the Russian state news agency, Tass, the Russian administration has suspended the publication of official statistics for oil, natural gas, and gas condensate production until April 2024.
Implementing a cut on exports rather than output will allow market participants who rely on independent third-party tracking data to verify Russia’s commitments.