Nigeria’s crude oil production fell to 1.57 million barrels per day in December, as the country complied with Organisation of the Petroleum Exporting Countries’ (OPEC) production cuts.
Due to the downward trend in oil prices, OPEC and its partners, including Russia, had agreed to cut output further by 500,000 BPD from January 2020 to March 2020. This is different from the previous cut of 1.2 million BPD already agreed. According to a monthly oil market report published by OPEC, Nigeria didn’t produce above the quota of 1.77 million BPD allotted.
“Nigeria is more sensitive about production than price. A lower oil output would affect the actualisation of budgeted revenue projections as oil revenue accounts for 31.35% of the total revenue projected,” analysts at the Financial Derivatives Company Limited said in a recent note.
Meanwhile, S&P Global Platts disclosed that from January 2020, Nigeria’s production quota would drop to 1.75 million BPD under the OPEC+ coalition’s agreement to deepen its production cuts through to March.
Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Mele Kayri, stated that Nigeria was shifting its upstream work towards natural gas liquids and natural gas, to enable the Nation better comply with its crude production quota under the OPEC+ agreement.
“You can produce condensate, which is not part of the OPEC commitments. We are focusing our production to more gas-based reservoirs so that we can continue to grow our production while maintaining balance in the market,” Kayri said.
However, OPEC disclosed in its report that growth in oil demand in 2020 would be offset by a sharper increase in non-OPEC supply, adding that the pace of supply growth was expected to continue to outpace oil demand. This is expected to further put pressure on interest for OPEC crude, which might imply the need to keep cutting output to balance the market.
“Continued accommodative monetary policies, coupled with an improvement in financial markets, could provide further support to ongoing increases in non-OPEC supply. OPEC+ cuts remained essential in maintaining stability in the oil market,” the report disclosed.
Meanwhile, for Nigeria OPEC’s crude production cuts might be good for the country as it seeks increased revenue to diversify its economy and improve the lives of the citizenry. Current oil price stands at $69.42 per barrel which is higher the budget benchmark of $60 per barrel.