Though the global oil benchmark, Brent crude, traded above $51 per barrel between Wednesday and early part of Thursday, after the Organisation of Petroleum Exporting Countries(OPEC) agreed on its first limit on oil output since 2008, analysts have argued that the country even though exempted may not gain much from the deal after all.
Business Hilights recalls that OPEC had in September said it would reduce production to 32.5 million barrels per day from the current figure of 33.24 million bpd.
Brent, against which half of the world’s oil is priced, had dropped to as low as $46.32 on Tuesday, but jumped to $49.66 per barrel on Wednesday on growing optimism OPEC would agree on a production cut deal later in the day.
Following the outcome of the meeting, Brent rose by $4.18 to $51.50 per barrel as of 6:45pm Nigerian time, but the economy may not gain much as militancy continue to frustrate efforts to high output with the period of the cut which ought to have been a clear blessing.
Nigeria’s total quota had been about 2.6mbpd, but militancy has lead to the drop to as low as 1.5mbpd, a development that will continue to weaken government’s plans to ease recession in record time.
At its 171st meeting in Vienna, Austria on Wednesday, the OPEC Conference studied the report and recommendations made by the high-level committee that was set up following the ‘Algiers Accord’ that was agreed at the 170th (extraordinary) meeting of the OPEC Conference on September 28 in Algeria, among others.
The 14-member oil cartel said in a statement that the conference took note of oil market developments since it last met in Algeria and reviewed the market outlook for the remainder of 2016 and 2017.
OPEC said, “The conference recorded its deep appreciation to the commitment and valued contribution of the high-level committee on the implementation of the ‘Algiers Accord’. The committee’s efforts helped form a consensus among member countries on the basis of a proposal put forward by Algeria to implement a new range of targeted production levels.
“Accordingly, and in line with the ‘Algiers Accord’, the conference decided to implement a new OPEC-14 production target of 32.5mb/d, in order to accelerate the ongoing drawdown of the stock overhang and bring the oil market rebalancing forward. The agreement will be effective from January 1, 2017.”
The Conference also decided to establish a high-level monitoring committee, consisting of oil ministers, and assisted by the OPEC Secretariat, to monitor the implementation of the agreement. Member countries, in agreeing to this decision, confirmed their commitment to a stable and balanced oil market, with prices at levels that are suitable for both producers and consumers.
The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, had last week said oil price might rise only slightly above $50 per barrel if a consensus was reached, and could fall as low as $44 without a deal.
Already, the decision to cut output may have forced Indonesia to exit OPEC whereas Iran, another exempt nation after Nigeria and Libya claim victory in the cut deal.
According to Iran, the feat can best be described as “Iran’s oil victory at OPEC” and “Failure of Riyadh’s oil diplomacy” were among the headlines in Iranian newspapers on Thursday morning, a day after the 14-member cartel agreed to reduce its output by 1.2 million barrels per day (bpd).
