Nigeria asks Opec to increase its crude oil production quota as prices fall below $70 a barrel

NIGERIA has asked the Organisation of Petroleum Exporting Countries (Opec) to increase her production quota of 1.77m barrels a day in response to falling global prices after Brent crude tumbled to below $70 a barrel yesterday.

 

Following the collapse in global crude oil consumption in the wake of the coronavirus pandemic, Opec and its allies decided to cut production significantly. This meant member states were asked to reduced their output, with Nigeria for instance compelled to cut its daily output to 1.77m barrels per day (bpd) barrels from 2.5m barrels bpd.

 

However, with the worst of the coronavirus pandemic over, oil prices begun rising and Opec and its allies agreed to increase their production by 400,000 barrels per day starting from August. This news immediately depressed prices with the cost of Brent crude, identical to Nigeria's Bonny Light Crude dropping by $5.01 to $68.58 per barrel.

 

After two and a half weeks of wrangling, Opec and its allies resolved on Sunday to increase their overall production by 400,000bpd a month, starting from August. According to S&P Global Platts, Opec also granted Saudi Arabia, Russia, the United Arab Emirates (UAE), Iraq and Kuwait, even higher output targets starting in May 2022.

 

In an appeasement to the UAE, the country will receive a 332,000 bpd boost to its reference production level, from which quotas are determined, starting in May 2022. Saudi Arabia and Russia will also be granted 500,000 bpd baseline increases, with Iraq and Kuwait getting 150,000 bpd rises.

 

By late 2022, when Opec expects to have fully unwound its 5.8m bpd in collective production cuts, those five countries would have expanded their output considerably, while most, if not all, of the remaining members would struggle to keep pace, ceding market share in the process. As a result, Nigeria’s minister of state for petroleum resources, Timipre Sylva, has voiced his displeasure at the arrangement, as did Algeria’s Mohamed Arkab.

 

Both countries are now appealing to the Opec+ co-chairs, Saudi Arabia and Russia, for increased production allocations, as well. Kazakhstan may also consider doing the same, while Iran and Venezuela, both exempt from quotas as they grapple with US sanctions, could find it more difficult to win back customers in the face of heightened competition.

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