Despite Pressure from World Powers, OPEC Announces 2m Barrels Production Cut

•Slashes Nigeria’s quota by 84,000 bpd for November

Emmanuel Addeh in Abuja

The Organisation of Petroleum Exporting Countries (OPEC) and its oil-exporting allies known as OPEC+ yesterday announced a two million barrel per day cut in oil production.

The oil cartel also slashed Nigeria’s oil production output by 84,000 bpd, although it’s not likely to substantially impact the country which has underperformed by as much as 700,000 bpd in the last couple of months.

It also came despite pressure from Washington to increase production. The development was expected to potentially spike oil and gas prices again.

Nigeria’s production fell in September to one of its lowest levels in a long time, with latest industry data showing output hitting a record low of 972,394 barrels per day in August.

The development marked a new low in the over a year-long downward spiral in Nigeria’s capacity to drill enough oil to boost its desperately needed foreign exchange even at a time that the commodity has continued to hover around a rarely seen price of $100.

The decrease below the one million bpd mark in production in August despite months of assurances of planned improvement by the Nigerian authorities, was more than 10 per cent compared to the July 2022 production of 1.083 million barrels per day.

THISDAY’s checks showed that in June the country’s production was 1.158 million bpd; it was 1.024 million bpd in May; 1.219 million bpd in April, 1.237 million bpd in March; 1.257 million bpd in February and 1.398 million bpd in January.

The quota given by OPEC to the country for the month of August was 1.826 million barrels per day, meaning that Nigeria under-produced to the tune of about 853,606 bpd during the month.

But yesterday’s announcement immediately led to the increase in the price of oil by about $3 a barrel Wednesday morning. Prices had fallen from about $120 a barrel in June to around $80 a barrel amid concerns about a potential global recession.

It was the first face-to-face gathering of OPEC members since 2020, but the move represents a major reversal in production policy for the alliance, which slashed output cuts by a record 10 million barrels per day in early 2020 when demand crashed due to the Covid-19 pandemic.

 The oil cartel has since gradually unwound those record cuts, albeit with several OPEC+ countries struggling to fulfill their quotas.

The production cut for November was an attempt to reverse a price fall even as the international benchmark Brent crude futures traded at $92.82 a barrel during afternoon deals in London, up around 1.1 per cent while United States West Texas Intermediate (WTI) futures stood at $87.37, almost one per cent higher.

A statement after the 45th Meeting of the Joint Ministerial Monitoring Committee (JMMC) and the 33rd OPEC and non-OPEC ministerial meeting yesterday, confirmed the reduction in production.

“In light of the uncertainty that surrounds the global economic and oil market outlooks, and the need to enhance the long-term guidance for the oil market, OPEC adjusts downward the overall production by 2 mb/d, from the August 2022 required production levels, starting November 2022 for OPEC and Non-OPEC Participating Countries,” it stated.

It further reconfirmed the baseline adjustment approved at the 19th OPEC and non-OPEC ministerial meeting and adjusted the frequency of the monthly meetings to become every two months for the JMMC.

OPEC further agreed to hold the OPEC and non-OPEC Ministerial Meeting (ONOMM) every six months in accordance with the ordinary OPEC scheduled conference.

The cartel further extended the compensation period to the 31st of March 2023, stressing that compensation plans should be submitted in accordance with the statement of the 15th OPEC and Non-OPEC ministerial meeting. The 34th OPEC and Non-OPEC ministerial meeting will be held on December 4, 2022

Nigeria recently took a raft of measures to curtail the oil theft menace, which so far appears to have defied all solutions.

Some of the measures included the renewed deployment of security personnel in the Niger Delta and the real-time monitoring of activities around the pipelines by the NNPCL.

In addition, the national oil firm has introduced the whistle-blower strategy as well as the handing over of a N4 billion monthly surveillance contract to ex-militant, Government Ekpemupolo, popularly known as Tompolo.

The federal government has variously blamed massive oil theft, vandalism of major assets, dilapidated infrastructure as well as declining upstream investment for its inability to drill more of the commodity.

On Tuesday, the Group Executive Officer of the NNPCL said the all-important Trans Niger Pipeline (TNP) which has been down for months will come online in the next few days.

Aside Nigeria, Angola had its production slashed by 70,000 bpd, Algeria’s by 48,000 bpd, Russia’s allocation will decrease by 526,000 bpd while the United Emirates will have a reduction of 160,000 bpd. Nigeria’s production will now be 1.742 million bpd for November.