Oil Price Rises as OPEC Maintains Output Cut for April

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•Kyari defends NNPC’s investments in fossil fuels

Emmanuel Addeh in Abuja

Oil price continued its surge yesterday as the Organisation of Petroleum Exporting Countries (OPEC) and its allies, better known as OPEC+, resolved to continue the prevailing March production levels through April.
The US oil benchmark, WTI Crude, jumped early yesterday to above $64 a barrel, soaring by more than five per cent, after OPEC+ sources began telling reporters that the coalition may be close to agreeing not to increase their collective oil production in April.

WTI Crude prices were surging by 5.06 per cent at $64.21 while Brent Crude prices jumped above $67 per barrel, to $67.17, up by 5.10 per cent, after OPEC+ sources started to leak insights from the OPEC+ ministerial meeting.

However, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, yesterday defended the corporation’s continuing investment in fossil fuels, despite the ongoing global energy transition to renewables.
The market was expecting a different outcome from yesterday’s OPEC+ meeting, including Saudi Arabia reversing its extra cut and the group lifting production by as much as 500,000 bpd.

Except for Russia and Kazakhstan, which were allowed to slightly increase their production quotas, many of the participating countries, including Nigeria, which was represented by the Minister of State, Petroleum Resources, Mr. Timipre Sylva, agreed to maintain current inventories.

Nigeria also received special commendation during the 14th meeting of the OPEC and non-OPEC ministers conference which held under the chairmanship of Saudi Arabia’s Minister of Energy, Prince Abdul Aziz bin Salman, and Co-chair, Alexander Novak, who doubles as the Deputy Prime Minister of the Russian Federation.

A statement after the meeting confirmed that Nigeria fully complied with the quota reduction in January, compensating for over-production and had since then being at the forefront of persuading others to follow suit through the recent shuttle by Sylva to convince some African countries to fully adhere the production curbs.

Aside Nigeria, which supported sustaining the current quota, sources close to the meeting stated that Kuwait, Venezuela, the United Arab Emirates (UAE), Brunei and Algeria also backed the decision to keep the current levels, in the deal which was first agreed on April 12, 2020.

The ministers lauded the voluntary extra supply reduction of one million barrels per day made by Saudi Arabia, which took effect on February 1, for two months, which supported the stability of the market and has now been extended to the April.

“The ministers approved a continuation of the production levels of March for the month of April, with the exception of Russia and Kazakhstan, which will be allowed to increase production by 130,000 and 20,000 barrels per day respectively, due to continued seasonal consumption patterns,” the cartel stated.

It welcomed the positive performance of participating countries, saying that the overall conformity with the original decision has now hit 103 per cent, reinforcing the trend of aggregate high compliance by participating countries.

The organisation stated that since the April 2020 meeting, OPEC and non-OPEC countries had withheld 2.3 billion barrels of oil by end of January 2021, accelerating the oil market rebalancing.
“The meeting extended special thanks to Nigeria for achieving full conformity in January 2021 and compensating its entire overproduced volumes.

“The ministers thanked Timipre Sylva, Minister of State for Petroleum Resources of Nigeria, for his shuttle diplomacy as special envoy of the JMMC to Congo, Equatorial Guinea, Gabon and South Sudan to discuss matters pertaining to conformity levels with the voluntary production adjustments and compensation of over-produced volumes,” the statement added.
OPEC agreed to the request by some countries, which have not yet completed their compensation, for an extension of the compensation period until end of July.

OPEC recognised the recent improvement in the market sentiment by the acceptance and the rollout of vaccine programmes and additional stimulus packages in key economies, but cautioned all participating countries to remain vigilant and flexible given the uncertain market conditions.

It called on member countries and allies to remain on the course which had been voluntarily decided and which had hitherto reaped rewards and fixed the next meetings of the JMMC and OPEC and non-OPEC ministers for March 31 and April 1, 2021, respectively.

Kyari Defends NNPC’s Investments in Fossil Fuels

The Group Managing Director of the NNPC, Mele Kyari, yesterday defended the corporation’s continuing investment in fossil fuels, despite the ongoing global energy transition to renewables.
He said during a virtual seminar organised by the Centre for the Study of Economies in Africa, the Nigeria Natural Resource Charter, in collaboration with Heinrich Boll Foundation, in Abuja, that the goal was to use the proceeds therefrom in catalysing the economy and create wealth.

He stated that although renewable energy sources are gaining ground, they remain a fraction of global energy needs, as fossil fuels like gas, which the corporation is currently investing in, will continue to be relevant in future.
Kyari, who was represented at the event by the Chief Operating Officer, Ventures and Business Development, Mr. Adetunji Adeyemi, added that with the expected coming on stream of the Dangote refinery, which has the capacity to process over 600,000 barrels per day, and the federal government’s refineries which are undergoing renovation, Nigeria will soon begin refining over one million barrels of crude oil.

“While we are transitioning to cleaner fuels and renewables, we have to use what we have to create wealth and fund ongoing projects and most importantly to move the Nigerian economy forward.
“Today, in Nigeria our target is about 2.1 million barrels per day and even if you add the Dangote refinery of about 650,000 bpd, with the NNPC one, it still comes to about one million bpd.

“If we are able to refine one million barrels of energy per day, that will have impact on energy supply security that we have been looking for and creation of jobs, boost economic activities from having refineries working in Nigeria, in addition to the petrochemicals from the various activities,” he said.