Emmanuel Addeh in Abuja
Nigeria and Angola, two major oil producers in Africa, are resisting a plan by the Organisation of Organisation of Petroleum Exporting Countries (OPEC) to compel both countries to reduce their crude oil production quota for next year, THISDAY learnt yesterday.
OPEC had in June cut Nigeria’s crude production to 1.38 million barrels per day from the current 1.74 million bpd in 2024, following the country’s inability to meet its quota for over three years.
However, Nigeria’s production benchmark in the 2024 budget has been pegged at 1.78 million bpd, a development that will jeopardise the country’s budget if it accepts the 1.38 million bpd ceiling by the producer’ group.
But a Bloomberg report said that Saudi Arabia was asking others in the OPEC+ coalition to reduce their oil-output quotas in a bid to shore up global markets but some members are resisting, quoting OPEC delegates.
The OPEC+ leader has been making a largely unilateral supply cutback of 1 million bpd since July, and is now seeking further support from across OPEC and its partners, said the delegates, asking not to be identified because the information is private.
The Saudi proposal comes amid difficult talks for the producers’ group, which was forced to delay its policy meeting by four days to November 30 as Angola and Nigeria resist reductions to their own quota limits for 2024, which were set out at the cartel’s last conference in June.
The producers were progressing toward a compromise on this matter before the weekend, but have yet to clinch an agreement, delegates said.
The 23-nation OPEC+ alliance faces pressure to intervene in crude markets, following a 17 per cent drop in prices over the past two months amid plentiful supplies and a darkening economic backdrop.
Markets could weaken further in early 2024, when forecasters including the International Energy Agency (IEA) anticipate the emergence of a new supply surplus.
Saudi Arabia’s voluntary production cut of 1 million barrels a day, implemented in tandem with a 300,000 barrel-a-day export reduction from Russia, is currently set to continue until the end of the year. Most analysts expect Riyadh and Moscow to extend those curbs into 2024.
Supply reductions across the alliance would probably win back oil bulls, but they could be hard to orchestrate. Iraq, Russia and Kazakhstan have recently been pumping over their quotas, while others like the African members have lost so much production capacity they’re in no position to cut further.
It’s also unclear whether the United Arab Emirates, a key member, will be under pressure not to proceed with a quota increase of 200,000 barrels a day permitted from January. Abu Dhabi secured the dispensation at the last OPEC+ gathering in June, in order to finally make use of recent investments in new capacity.
“The group is no closer to resolving the deadlock over oil-output quotas for some African nations, delegates said. The stalemate may not be resolved before the scheduled OPEC+ meeting on November 30, potentially requiring further delay, one delegate added.
In a volatile session, global benchmark Brent crude’s prices were up 1.3 per cent before briefly erasing gains and then trading higher once again yesterday.
The group is heading into the meeting with prices having dropped by about a fifth since late September due to plentiful supplies and concerns about the global economic backdrop. The relative weakness has fuelled expectations that the group will embark on deeper supply cuts.
The implementation of Nigeria’s 2024 budget faces a major test if negotiations fail between the country and the OPEC.
Last Wednesday, the Senate approved the Medium-term Expenditure Framework (MTEF) for 2024-2026 and the Fiscal Strategy Paper (FSP), which contained projections for budget appropriations over the next three years.
Specifically, the lawmakers approved $73.96, $73.76 and $69.90 per barrel, respectively as benchmark oil prices for daily crude oil production of 1.78 million bpd, 1.80 million bpd, and 1.81 million bpd for 2024, 2025 and 2026.
However, THISDAY can report that the figures may be unrealistic, given that OPEC’s quota for Nigeria for next year was in June pegged at 1.38 million bpd, following its inability to meet its current allocation for about three years.
Although there were reports that OPEC was close to resolving the dispute over the output quotas which forced the group to postpone a pivotal meeting during the week, as it reviewed the demands made on Nigeria and Angola in an earlier deal, no deal has has been reached.
The group is working to tweak the 2024 targets set for both countries to allay unease they expressed in recent days, a delegate said.
Deadlock on the issue compelled Saudi Arabia and its partners to postpone their policy-setting gathering in Vienna this weekend to the end of the month.
The African exporters have struggled in recent years with under-investment, operational disruptions and aging oil fields.