Nigeria has joined other OPEC+ counterparts in a historic cut of crude oil production to rebalance and stabilise the global oil markets.
The oil producing countries will cut supply by up to10 million barrels per day between May and June 2020; 8 million barrels per day between July and December 2020 and 6 million barrels per day from January 2021 to April 2022.
Based on reference production of Nigeria of October 2018 which is 1.829 million barrels per day of dry crude oil, Nigeria will now be producing 1.412 million barrels per day from May 1 and 1.495 million barrels per day in July this year. The production will however rise to 1.579 million barrels per day from January 2021 for the corresponding periods in the agreement.
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This is in addition to condensate production of between 360-460 KBOPD of which are exempt from OPEC curtailment. The agreement awaits close out of ongoing engagement with Mexico to agree on its full participation.
It is expected that the intervention when concluded will see crude oil prices rebound by at least $15 per barrel in the short term, thereby enhancing the prospect of exceeding Nigeria’s adjusted budget estimate that is currently rebased at $30 per barrel and crude oil production of 1.7 million barrels per day. The price rebound may translate to additional revenues of not less than $2.8 billion for the Federation Account.
Despite the production curtailments that the historic agreement will entail, all planned industry development projects will progress as they will be delivered after the termination of the 9th OPEC/Non-OPEC Ministerial Meeting Agreement on adjustments in April 2020.
