Home Business Nigeria’s October compliance nears 90% as Libya leads OPEC+ output | The Guardian Nigeria News

Nigeria’s October compliance nears 90% as Libya leads OPEC+ output | The Guardian Nigeria News

Nigeria’s October compliance nears 90% as Libya leads OPEC+ output | The Guardian Nigeria News

OPEC+ crude oil output ticked up 210,000 barrels daily (b/d) in October, the latest S&P Global Platts survey found, as the alliance readies to set production levels for 2021 in what may be an increasingly oversupplied market.

OPEC’s 13 members pumped 24.54 million b/d, while nine allies, led by Russia, have been coordinating supply with the organisation since 2017 added 12.73 million b/d, according to the survey.

War-weary Libya, which was exempted from having an OPEC+ quota as it seeks to put years of war and instability behind it, was largely responsible for the output gains, almost tripling its output to 460,000 b/d in October – the country’s highest production since January.

Its state-owned National Oil Corp. on November 7, reported that it was now producing more than 1 million b/d, as a tenuous ceasefire between rival groups has allowed fields and ports to reopen.

Platts noted that Nigeria, with substantial compensation cuts owed, remained above its quota at 1.53 million b/d.

According to the survey, by subtracting its approximately 160,000 b/d of Agbami grade, which the country maintains is condensate, and thus not covered under the OPEC+ pact, Nigeria would be in solid compliance.

“Even with Agbami included, Nigerian production is at its lowest since December 2016, when sabotage to oil infrastructure by militias caused output to slump,” Platts added.

The Federal Government, especially the Department of Petroleum Resources (DPR), had reiterated its commitment to OPEC cuts through its compliance to the agreed quota.

Nigerians are watchful of the quota and movement in oil prices due to subsidy removal and impact on budget financing.

Indeed, the 2020 budget was prepared based on an oil benchmark price projection of $57 per barrel, an oil production capacity of 1.8 million barrels per day; an exchange rate of N360 to the dollar; an inflation rate of 14.13 per cent, and GDP growth rate of 4.2 per cent.

Following the ravage of COVID-19, the Minister of Finance, Budget and National Planning, Zainab Ahmed, recently said the parameters were revised to crude oil price of $38.64 per barrel between January and July; crude oil production capacity of 1.8 million BPD; exchange rate of N379 to the dollar; inflation rate of 12.82 per cent and GDP growth rate of 2.188 per cent.

For the 2021 budget, the Federal Government will borrow from domestic and foreign sources, including multilateral and bilateral finance organisations, to finance the 2021 N5.2 trillion deficit.

OPEC and its allies in May implemented a 9.7 million b/d production cut accord that tapered to 7.7 million b/d from August to December. It is scheduled to scale down again to 5.8 million b/d from 2021 through April 2022.
The cuts are determined for most countries from an October 2018 baseline production level, except for Saudi Arabia and Russia, which were given baselines of 11 million b/d.

Libya’s comeback will add pressure on the OPEC+ coalition’s efforts to rebalance the market after the crash caused by the coronavirus pandemic, says Platts.

The alliance, which controls about half of global oil supply, is already grappling with a stalling recovery in demand that could be exacerbated by another round of lockdown measures in major economies, and the apparent victory of Joe Biden over Donald Trump for the White House could see the U.S. ease sanctions on Iran, eventually paving the way for more of its barrels to hit the market.

Oil prices have slid in recent weeks from above $45/b in September to around $40/b, reflecting the bearish outlook and putting OPEC+ members’ finances under strain.

Given these conditions, OPEC+ officials have strongly hinted that their original plan to ease quotas for 2021 by some 2 million b/d is likely to be shelved for at least a few months, though no details have yet been settled.

Some have suggested tighter cuts could even be on the table, but already slack compliance among some members facing domestic political pressures would make such an agreement difficult to pass.

Ministers will determine 2021 production volumes when they convene online November 30 – December 1. A key OPEC+ monitoring committee co-chaired by the alliance’s two largest members, Saudi Arabia and Russia, will meet November 17 as the first step towards a decision.

OPEC kingpin Saudi Arabia pumped 8.99 million b/d in October, right at its quota, according to the survey, while Russia, which has an identical cap, produced 9.11 million b/d.

Overall adherence with the OPEC+ production accord, which instituted steep output cuts in the wake of the coronavirus market crash, improved to 100.2% in October for the 19 members with quotas, boosted by the UAE’s robust over-compliance. Besides Libya, sanctions-hit Iran and Venezuela are exempt.

The UAE produced 2.42 million b/d in October, the survey found, more than carrying out the 100,000 b/d in so-called “compensation cuts” it had pledged to make beyond its 2.59 million b/d quota to make up for previous months’ production above its cap.

Abu Dhabi National Oil Company, which pumps the vast majority of the UAE’s crude, has said the extra cuts will continue in November and December, having already informed its term customers of significant reductions in allocated volumes.

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