…As OPEC+ mull output increase
…Pact with Russia, other producers my priority- OPEC sec-gen , Haitham al-Ghais
With an increased oil benchmark price of $62.00 per barrel by the National Assembly in Nigeria’s 2022 budget, the country stands the risk of falling short of its budget target.
With threat from the uncertainties posed by the raging coronavirus disease, the U.S. President Joe Biden’s hint of releasing reserves, the OPEC+ plan to increase daily production by 400,000 barrels per day on a monthly basis, and concerns about Nigeria’s production capacity, there is palpable threat that the prices of oil may fall.
Although the price of Brent crude stood at $78.84 and Bonny Light at $76.00 at 19:50 yesterday, the Organisation of Petroleum Exporting Countries plus Russia and Kazakhstan (OPEC+) has indicated it will stick to plans to increase output in February when it meets today, seeing a mild and short-lived impact on demand from the Omicron coronavirus variant.
OPEC and allies led by Russia, has been gradually unwinding record oil production cuts of 10 million barrels per day (bpd), about 10 per cent of global oil output, agreed in March 2020 to counter the hit to demand from the pandemic.
Current plans would see it raise its February production target by 400,000 bpd as it has done each month since August, when it began to unwind 5.8 million bpd of remaining cuts.
By the end of January, the group is left with about 3.4 million bpd of cuts to unwind by the end of September, as per its July 2021 agreement.
OPEC met on Monday and agreed to appoint Haitham al-Ghais, a former Kuwaiti governor to OPEC, as its new secretary general, to succeed Nigeria’s Mohammad Barkindo, according to an OPEC statement.
Al-Ghais said a top priority for him is to keep the group’s pact with Russia and other producers in place, since it is in the wider interest of the oil industry. Russia is keen to ramp up production quota in the cartel.
Also, the United States has repeatedly pushed OPEC+ to accelerate output hikes as U.S. gasoline prices soared and President Joe Biden’s approval ratings slid. Faced with rebuffals, Washington said last week it and other consumers would release reserves.
Fearing another supply glut, sources said the Organization of the Petroleum Exporting Countries, Russia and allies considered a range of options in talks, including pausing their January hike of 400,000 barrels per day (bpd) or increasing output by less than the monthly plan.
But any such move would have put OPEC+, which includes Saudi Arabia and other U.S. allies in the Gulf, on a collision course with Washington. Instead, the group rolled over its existing deal to increase output in January by 400,000 bpd.
Ahead of the talks, U.S. Deputy Energy Secretary David Turk indicated there might be flexibility in the U.S. release of reserves, saying on Wednesday that Biden’s administration could adjust the timing if oil prices dropped substantially.
Another indication of a potential fall in prices is that China, Asia’s biggest oil user, has shown signs of weakening fuel demand amid its relentless zero-Covid approach and tough line on pollution, according to road-congestion data from local providers like Baidu Inc.
In the US, airline cancellations are already piling up, with 1,125 flights scrubbed as rising coronavirus cases hobble staffing.
However, while the group has been raising its targets, its production increases have not kept pace as some members struggle with capacity constraints.
OPEC+ oil producers missed their production targets by 650,000 bpd in November and 730,000 bpd in October, the International Energy Agency (IEA) said last month.
It revised the 2021 deficit up by 300,000 bpd to 1.5 million bpd and it trimmed the 2022 surplus from 1.7 million bpd to 1.4 million bpd.
Nigeria has been one member country that has not kept pace with production quota based on capacity constraints.
Nigeria crude production was reported at 1,420.000 barrels/day in Nov 2021. This records an increase from the previous number of 1,335.000 bpd for Oct 2021.
Production data is updated monthly, averaging 1,938.000 bpd from January 2002 to November 2021, with 239 observations. The data reached an all-time high of 2,496.000 bpd in November 2005 and a record low of 1,296,000 bpd in August 2021.
Failure to meet its daily target of 1.88 million would further threaten the realization of its fiscal target.