• Friday, March 01, 2024
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BusinessDay

Nigeria’s stubborn push for higher OPEC quota leaves cartel leaders scrambling

Subsidy, stranded crude rob Nigeria of gains in OPEC+ cut

Cash strapped Nigeria is stubbornly holding in in a push to get a higher oil quota as OPEC+ inch closer to resolving a dispute over output quotas that forced the group to postpone a pivotal meeting days ago.

The cartel is battling to accommodate fierce demand from Nigeria and fellow OPEC member Angola whose needs have to be met before a deal can be reached for 2024 quota allotments.

The group is working to tweak the 2024 targets set for Angola and Nigeria to allay unease they expressed in recent days, according to a delegate. Deadlock on the issue compelled Saudi Arabia and its partners to postpone their policy-setting gathering in Vienna this weekend to next week. Talks continue and agreement looks within reach, officials said on Friday.

The spat dredged up a disagreement from June, when Angola, Congo and Nigeria were pushed by Saudi Energy Minister Prince Abdulaziz bin Salman to accept reduced output targets for 2024 that reflected their diminished capabilities.

Read also: Nigeria’s 1.83mbpd OPEC quota faces lingering hurdles

Nigeria and other African exporters have struggled in recent years with under-investment, operational disruptions and aging oil fields but Nigeria’s struggle with an acute foreign exchange shortage means that the country must dig.

A compromise now would allow the Organization of Petroleum Exporting Countries and its partners to focus on whether they need to agree steps to tighten supplies in 2024, amid the threat of slowing demand — and falling prices.

OPEC+ leaders Saudi Arabia and Russia are expected to at least extend just over 1 million barrels-a-day of output curbs through the first quarter, to pare a looming surplus. They could also announce deeper cuts to deter bearish speculators, RBC Capital Markets LLC and hedge fund manager Pierre Andurand say.

Brent crude futures have slumped by about 15% over the past two months to trade around $81 a barrel on Friday, eroding revenues for the cartel. Saudi Arabia may need oil near $100 to avoid a budget deficit, according to Bloomberg Economics.

At OPEC’s latest meeting in June, Angola and Nigeria were pressed to accept considerably lower limits for 2024, at 1.28 million barrels a day and 1.38 million a day respectively.

The countries had reluctantly acquiesced to the new quotas with the caveat that they’d be revised higher again if an external audit by three firms — Rystad Energy A/S, Wood Mackenzie Ltd. and IHS — proved their capacity was larger. That assessment has been submitted, but the trio pushed back against its findings, officials said, speaking on condition of anonymity.

Read also: Nigeria, Angola plot higher oil export quota amid OPEC+ talks

Nigeria has shown recently that it can surpass its new limits. It pumped 1.416 million barrels a day last month, or 36,000 barrels a day above its target for 2024, according to data from OPEC’s Vienna-based secretariat.

As part of the deal agreed in June, the United Arab Emirates secured the right to increase production modestly in January in order to deploy recent capacity additions. It’s unclear whether there’s any pressure now for Abu Dhabi to relinquish that boost in order to shore up flagging markets.