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Relief for Nigeria as OPEC extends oil output cut till 2018

National Assembly can now go on to effectively situate discussions bordering on oil benchmark for the 2018 budget considering the decision on Thursday, by oil producer nations to agree keeping a lid on output for all of next year.

Debate on the budget was on Thursday, put on hold by lawmakers in anticipation of what the oil cartel, the Organization of Oil Producing Countries (OPEC), will decide later in the day.

Again, the new deal reached by OPEC means that the recovery of the Nigerian economy from recession will be further consolidated within the period of the cut extension regime.

However, Russia seems to be developing what analysts describe as cold feet and tensions between Iran and Saudi Arabia in the Middle East may weaken the new deal.

Twenty-four countries decided to maintain production curbs of 1.8 million barrels per day until December 31, 2018, the energy minister of OPEC kingpin Saudi Arabia said.

Khaled al-Falih told a news conference in Vienna that “I am pleased to announce that the decision has been unanimous. It’s a solid decision… which is to roll over and extend the deal through the end of December 2018”.

The agreement among the 14 members of the Organization of the Petroleum Exporting Countries and 10 others including Russia was first struck a year ago and was already extended once until March 31, 2018.

The aim is to reduce a global excess in supply that has pushed oil prices lower and left a huge hole in the finances of producer nations, despite making life easier for buyers of crude.

So far, it has worked, helping oil prices climb from less than $30 in early 2016 to around $60 now and reducing bloated inventories to more normal levels.

On Thursday oil prices dipped, however, giving back some of their recent gains, with Brent Crude off 23 cents at $62.30 and fellow benchmark West Texas Intermediate down 26 cents at $57.04.

The situation has been helped by improved economic conditions, notably in energy-hungry China, that have boosting demand for crude.

Higher prices have been of little help to OPEC member Venezuela, however, teetering on the brink of a full-blown debt default.

Manuel Quevedo, the general newly installed as Venezuela’s oil minister in Vienna, put the country’s dire production problems down to “sabotage”.

Relations between OPEC members Iran and Saudi Arabia have deteriorated sharply in recent months, with the two countries engaged in a devastating proxy war in Yemen and backing different sides in Syria.

Saudi Arabia’s Crown Prince Mohammed bin Salman, who is moving to modernise and wean the kingdom off oil, last week called Iran’s supreme leader “the new Hitler of the Middle East”.

But when it comes to selling oil, their interests meet, with both sides managing to keep their differences outside the room in Vienna and back the extension of the output accord.

Non-OPEC Russia also supported the extension, despite misgivings in particular from Russian oil firms.

They fear that higher oil prices will help US shale oil producers ramp up output and grab market share.

In addition, Moscow wants to be able to take stock of the agreement again in mid-2018 and is pressing for clarity on how and when to end the curbs, experts said.

“The Russians want to assess the markets in the middle of next year,” Abhishek Deshpande at JP Morgan told AFP.

“And within Russia, it’s not just one big oil producer like in other countries. Their producers are not necessarily working in the same way as say Saudi Aramco in Saudi Arabia.”