Nigeria’s revenue to rise as Russia and Saudi Arabia agree to cut back supply

Government revenue will enjoy a boost as crude oil prices are set to rise following agreement reached by Saudi Arabia and Russia to cut back oil output after talks in Qatar today.

Russia and Saudi Arabia has agreed to fix production at January levels on the condition that other nations agree to participate.

Saudi Arabia Oil Minister, Ali Al-Naimi said the oil rich nations still wants to meet the demand of its customers after talks with Russian Energy Minister Alexander Novak.

Qatar and Venezuela has agreed to participate in cutting back on oil production.

Emmanuel Kachikwu, minister of state for petroleum, and President of the Organization of Petroleum Exporting Countries (OPEC) told Reuters this week that Nigeria had plans to increase production to about 2.5 million barrels per day, a move that would require review based on current developments.

However, the agreement is not without those who doubt that it will help revert the slump in oil prices.

“This is an announcement of a production freeze among countries whose production didn’t even grow recently,” Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt told Bloomberg, “If Iran and Iraq are not a part of the agreement it’s not worth much and even then there is still a question of compliance.”

Iran, OPEC’s fifth –largest produced stated that it was not cutting back production when the group met in December. It plans to boost output and exports by 1 million barrels a day this year following lifting of international sanctions last month.

Iraq, emerging from years of conflict has boost production to a record 4.35 million barest a day in January according to the International Energy Agency January Market report.

Quarter will lead the monitoring of the output freeze agreement, the nation’s Energy Minister Mohammed bin Saleh al-Sada said at a press briefing.

“Low oil prices, haven’t been positive for the world” he said.

According to the IEA, Saudi Arabia produced 10.2 million barrels a day in January below the most recent peak of 10.5 million barrels a day set in June 2015.

Russia produced nearly 10.9 million barrels a day in the same month, a post-Soviet record according to official date. Venezuela pumped 2.4 million barrels a day and Qatar produced 680,000 per day according to the IEA.

Bloomberg reported before the deal that oil pared gains on speculation that a pledge by Saudi Arabia and Russia will freeze production yesterday.

Brent crude was about 2.4 per cent higher having earlier climbed as much as 6.5 per cent.

Venezuela have led the lobby for exporters including Russia, Iran, Saudi Arabia to arrange a meeting between OPEC members and other suppliers in an attempt to reach an agreement to balance the market.

Nigeria’s quest to increase crude oil production has been stunted by pipeline vandalism leading to shut-ins.

According to Nigerian National Petroleum Corporation (NNPC) figures released this week for 2015 financial activities, the corporation reported a loss of N267 billion largely from its refining division that has seen a surge of pipeline vandalism in recent times.

 

ISAAC ANYAOGU