Indication emerged on Monday that the Federal government has agreed to OPEC’s terms to voluntarily cap its oil output at 1.8 million barrels per day (bpd) once it reaches that level.
This was announced by the Kuwaiti Oil Minister Essam al-Marzouq while the cartel continues to weigh options for Nigeria and Libya whose oil producing regions had been under siege by militancy.
The new cap which Nigeria is yet to hit stemmed from Russia’s call on OPEC to limit oil output rises from its members Libya and Nigeria in the near future, as it hosted a meeting of key OPEC states on Monday to discuss ways to prop up oil prices.
OPEC has agreed with several non-OPEC producers led by Russia to cut oil output by a combined 1.8 million bpd from January 2017 until the end of March.
OPEC states Libya and Nigeria are exempt and their production has been rising.
The deal to curb output propelled crude prices above $58 a barrel in January but they have since slipped back to the $45 to $50 range as the effort to drain global inventories has taken longer than expected.
However, rising output from U.S. shale producers has offset the impact of the output curbs, as has climbing production from Libya and Nigeria, which were granted an exemption from the cuts to allow their industries to recover from years of unrest.
Russia’s energy minister Alexander Novak said on Sunday that Libya and Nigeria were approaching the moment when their output should be capped due to significant rises in recent months.
“I think that these countries should join other responsible oil producers and contribute to the market stabilisation initiative as they reach a stable level of output,” Novak told the Financial Times.
Libya has been producing over one million bpd, below its capacity of 1.4 million to 1.6 million bpd but near its record high since unrest erupted that toppled former leader Muammar Gaddafi in 2011.
Nigeria has also ramped up output in recent months hitting about 1.7mbpb momentarily.
Confirming the development, OPEC Secretary-General Mohammad Barkindo concurred that Nigeria has no intention of going beyond its oil production target of 1.8 million barrels per day (bpd) until the end of March 2018.
He also said Libya has an output target of 1.25 million bpd by December, but it remains a target given the challenges the country faces.
Saudi Energy Minister Khalid al-Falih said OPEC and 10 other major oil producers remained supportive of conflict-torn Libya and Nigeria as they attempt to recover and increase crude production.
OPEC and some non-OPEC states including Russia agreed in 2016 to cut production by 1.8 million barrels per day (bpd) in a deal that has been extended to March 2018.
Al-Falih at the opening of the fourth Joint OPEC-non-OPEC Ministerial Monitoring Committee (JMMC) in St. Petersburg said “Libya and Nigeria, are exempt from our agreement on oil output cuts”.
“Of course, we remain supportive of our brothers and partners in both nations as they work on the recovery of their oil industries and their economies.”
He said the market had faced pressure in recent weeks due to weaker OPEC compliance with cuts and rising production from Libya and Nigeria, which have been exempt from the reductions.
