Thursday, December 1

OPEC slashes production by 1.2mb/p, exempts Nigeria

OPEC slashes production by 1.2mb/p, exempts Nigeria

Oil rises above $50

After seven hours of deliberation, the Organisation of Petroleum Exporting Countries (OPEC) yesterday agreed to reduce oil production by around 1.2 million barrels per day from January 1, 2017.

However, Nigeria and Libya were exempted from the cut, while Indonesia suspended its membership after refusing to agree to the deal. This is the first time since 2008 that an agreement of this nature was reached to reduce supply despite several attempts. Saudi Arabia accepted “a big hit” on its production.

A breakdown of the agreed oil production adjustment made available to the media by the OPEC Secretariat after the conference shows that Saudi Arabia is expected to make the largest contribution by cutting production by 486,000 b/d.

Also, Algeria is expected to reduce its output per day by 50,000; Angola, 87,000; Ecuador, 26,000; Gabon, 9,000; Iran, 90,000; Iraq, 210,000; Kuwait, 131,000; Qatar, 30,000; UAE, 139,000 and Venezuela by 95,000.

Saudi Arabia has production output of 10.06 million bpd, while Iran production output is at 3.797 million bpd. Qatar’s Minister of Energy and Industry, Dr. Mohammed Al-Sada, disclosed these at a news conference at the end of the 171 meeting of the Conference of the OPEC on Wednesday in Vienna.

The meeting started at about 9:30a.m. and lasted till about 5:30p.m. “This agreement was reached following extensive consultations and understanding reached with key non-OPEC countries, including the Russian Federation, that they contribute by a reduction of 600,000 barrel per day.

“The duration of this agreement is six months, extended for another six months to take account of prevailing market conditions and prospects.

“We also agreed to establish a ministerial monitoring committee composed of Algeria, Kuwait, Venezuela and two participating non-OPEC countries, chaired by Kuwait and assisted by the OPEC secretariat.

“They are expected to closely monitor the implementation of and compliance with this agreement and report to the conference,” Al-Sada said. He said the next Ordinary Meeting would convene in Vienna, Austria, on May 25, 2017, to review the implementation of the agreement. “OPEC has proved to the skeptics that it is not dead.

The move will speed up market rebalancing and erosion of the global oil glut,” said OPEC watcher, Amrita Sen, from Energy Aspects. Minister of State for Petroleum, Dr. Ibe Kachikwu, said vandalism of crude oil pipelines and militancy in the Niger Delta was the reason Nigeria was exempted.

“We are grateful that OPEC was understanding of the case we made about why Nigeria needs to be exempted from this cut. “This gives us time to get our house in order by resolving the Niger Delta crises.

Already, production in Nigeria is up at 1.9 million barrels and we expect to get it up to 2.2 million, but not flood the market. “We all have the responsibility to contribute to the tightness of this market,” he said.

Kachikwu said the cut would re-balance the price of crude oil globally and projected that oil prices would go up to 60 dollars per barrel from the 50 per cent it traded yesterday.

Meanwhile, oil prices soared over eight per cent on Wednesday as some of the world’s largest oil producers agreed to curb oil output in a last-ditch bid to support prices.

Brent crude futures jumped eight per cent to over $50 a barrel. US West Texas Intermediate crude futures CLc1 for January delivery rose $3.93 to $49.16 a barrel, an 8.7 per cent gain.

The move was the largest one-day gain since February. Brent crude LCOc1 futures for January delivery rose $3.73 to $50.11 a barrel, an 8.0 per cent gain. Brent futures for February LCOc2 rose 8.8 per cent, or $4.16 to $51.48 a barrel.

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