Oil Prices Continue Rally on OPEC, Russia Output Deal

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How Kachikwu negotiated Nigeria’s exemption
Ejiofor Alike with agency reports
Crude oil prices rose $1 per barrel yesterday, building on big gains made after the Organisation of Petroleum Exporting Countries (OPEC) and Russia agreed to restrict production to drain a global glut.

Under the agreement, the Minister of State for Petroleum, Dr. Ibe Kachikwu, successfully negotiated a key concession exempting Nigeria from the production cuts, citing the attacks on oil and gas facilities by the Niger Delta militants in recent months

OPEC agreed last Wednesday its first oil output reduction since 2008 after de-facto leader, Saudi Arabia, accepted “a big hit” and dropped a demand that arch-rival Iran also slashed output.
The deal also included the group’s first coordinated action with non-OPEC member, Russia, in 15 years, according to Reuters.

The OPEC deal triggered frenzied trading, with the global benchmark, Brent crude yesterday rising $1.10 a barrel to a high of $52.94, ending at $52.90, up $1.06.
Last Wednesday, the Brent contract rose by $4.09 or 8.8 per cent to $50.47. United States light crude oil was up $1 a barrel at $50.44.

However, oil prices are still only at September-October levels – when plans for a cut were first announced – and crude oil prices are less than half mid-2014 levels, when the oil prices began to collapse.

Rising from its 171st meeting held at the OPEC headquarters in Vienna last Wednesday, OPEC reached a landmark deal that will effectively cut production by about 1.2 million barrels per day (mbpd), or about 4.5 per cent of current production, to 32.5 million barrels per day.
This agreement follows an earlier meeting held in September in Algeria, where each member country reached a consensus on the need to cut production.

Speaking on the deal, the Director, Press at the Ministry of Petroleum Resources, Idang Alibi, spoke on Kachikwu’s negotiation in getting Nigeria, Iran and Libya exempted from the production cuts.
The details of the deal saw Saudi Arabia agreeing to take the deepest cut of 486,000 barrel a day to its output, while persuading Iraq to reach a decision to reduce its output, as well as getting non-OPEC producer, Russia, on board for a 300,000 barrel-a-day cut, according to the statement.

Alibi said the landmark deal was made possible because Kachikwu worked assiduously with ministers from other OPEC countries and Nigeria’s Dr. Mohammed Sanusi Barkindo, the Secretary General of OPEC, to steer the organisation to achieve and sustain unity and competitiveness in the global energy market.

According to the statement, member countries at the meeting agreed on the deal where considerations of the cartel offered to Iran, Libya and Nigeria would mean that in 2017, total production might likely increase, even as other members sought to cut output in the first quarter of next year.

It added that Kachikwu, who led Nigeria’s delegation to the meeting, championed the negotiation which saw Nigeria get the exemption from the production cuts.
“The concession was given as the country has been through production challenges recently due to the vandalism of oil and gas infrastructure which has negatively affected the country’s ability to produce oil optimally in the recent past,” the statement said.