â€¢ Oil price hits $64 per barrel
â€¢ Kachikwu explains exemption from production cuts
Ejiofor Alike with agency report
The Organisation of Petroleum Exporting Countries (OPEC) Thursday took a decision to cap the output of Nigeria and Libya at 2017 production levels without deciding on the figures.
The oil cartel also agreed to extend oil output cuts until the end of 2018 as part of the global efforts to eliminate excess oil supply in the international market.
Nigeria, Africaâ€™s biggest oil producer, and Libya had previously been exempted from the cuts due to unrest in both countries and lower-than-normal production.
However, the decision to extend the production cuts saw crude oil prices rising, with the global benchmark Brent trading near a two and a half year high above $64 per barrel.
Speaking to reporters after Thursdayâ€™s OPEC meeting in Vienna, Austria, Iranian oil minister Bijan Zanganeh said the organisation had agreed to extend the cuts by nine months until the end of 2018, as largely anticipated by the market.
The current deal, under which OPEC and non-OPEC producers are cutting supply by about 1.8 million barrels per day (bpd) in an effort to boost oil prices, expires in March 2018.
Zanganeh added that OPEC also decided to cap the output of Nigeria and Libya at 2017 levels.
The OPEC meeting was followed by talks with non-OPEC producers led by Russia.
Before the meeting, Saudi energy minister Khalid al-Falih said it was premature to talk about exiting the cuts at least for a couple of quarters and added that OPEC would examine progress at its next regular meeting in June.
â€œWhen we get to an exit, we are going to do it very gradually … to make sure we donâ€™t shock the market,â€ he said.
The Iraqi, Iranian and Angolan oil ministers also said before Thursdayâ€™s meetings that a review of the deal was possible in June in case the market became too tight.
But Zanganeh said later no such debate had taken place at the OPEC meeting.
Reacting to OPECâ€™s decision, the international benchmark Brent crude rose by more than 1 per cent Thursday to trade near $64 per barrel while the U.S. West Texas Intermediate crude rose to $57.63, after falling more than two per cent since last week.
With oil prices rising above $60, Russia had expressed concern that an extension for the whole of 2018 could prompt a spike in crude production in the U.S., which is not participating in the deal.
Russia needs much lower oil prices to balance its budget than OPECâ€™s leader Saudi Arabia, which is preparing a stock market listing for national energy giant Aramco next year and would hence benefit from pricier crude.
Russia had signalled it wants to understand better how producers will exit from the cuts as it needs to provide guidance to its private and state energy companies.
â€œWe need to work out a strategy for 2018,â€ Russian energy minister Alexander Novak had said.
Reuters reported that Russia, which this year reduced production significantly with OPEC for the first time, has been pushing for a clear message on how to exit the cuts so the market doesnâ€™t flip into a deficit too soon, prices donâ€™t rally too fast and rival U.S. shale firms donâ€™t boost output further.
Meanwhile, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, explained Thursday that the decision taken on Nigeria at Thursdayâ€™s meeting stemmed from the resistance by the Nigerian delegation to the word â€œcutâ€ in crude production, effectively exempting the country and Libya from the production cuts imposed on other oil producers that are part of the agreement.
The minister, however, admitted that Nigeria was cautioned to be disciplined and not flood the global market with crude.
Kachikwu made this known when he spoke to Bloomberg on the sidelines of the 173rd meeting of the OPEC holding in Vienna.
â€œWeâ€™ve been asked to be disciplined, the word cut has not been used. Weâ€™ve resisted the word â€˜cutâ€™. The word â€˜capâ€™ had been accepted by me a long time ago,â€ he said.
â€œClearly, there is a continuing obligation to ensure that we do not just flood the market because of the exemptions we were given.
â€œThereâ€™s a lot more energy around bringing everybody to the ballpark, Nigeria is willing to be in that ballpark and contribute.
â€œOur contribution is fairly limited because we are still lacking in that capacity to reach the marks anywhere soon.â€
He put Nigeriaâ€™s current production at around 1.75 million barrels per day, adding that the 1.8 million barrels benchmark was comfortable.
â€œOur current production is 1.75, we are still below the 1.8 that was the benchmark which is comfortable but youâ€™re going to see a lot more pressure as we go into next year
â€œSometime late next year, we will probably see the capacity of Nigeria to do close to 2.3, 2.5.
â€œCan we do it? Probably not if we all keep to discipline. We are now going to be looking at producers within our country and those giving us barrels at the least cost price because we are going to cut scientifically those who are unable to produce below a certain benchmark,â€ he explained.