There might be hope for Nigeria and other producers in the oil market as Russia said it is still open to OPEC negotiation on oil production cut days after engaging in a price war with Saudi Arabia.
Russia’s Energy Minister, Alexander Novak, said the second-largest oil producer had not shut its doors on deliberation, stating that it could still reach agreeable terms with OPEC and non-OPEC countries.
“I want to say the doors aren’t closed,” Novak said, adding that the fallout with OPEC members “does not mean that in the future we can’t cooperate with OPEC and non-OPEC countries.”
According to him, “If necessary we have various tools including reduction and increasing production.”
He, however, said Russia has been competitive because of low production cost, “We have the potential for growth in production. I think in the short-term we can increase by 200-300,000 barrels (per day) with the prospect of 500,000 barrels, that’s in the near future.”
But Novak said a meeting had been planned for “May or June to assess the situation on the market.”
Nairametrics had reported that Saudi Arabia and Russia disagreed on a production cut and this made the two countries increase their production, pursuing conflicting self-interests.
This negatively impacted the oil market as excess production crashes price, but limited supply inflates market price. Just as OPEC believes that by cutting supplies, it will force prices to rise, Russia believes a price war is the only solution to curtailing the rise and spread of shale oil which is produced by the US.
The disregard for supply cut has affected oil producers like Nigeria where the economy depends on oil revenue. Nigeria’s budget is benchmarked on the Brent crude oil price of $57 per barrel. But with the oil price crashing down to $30, there is a major setback for President Buhari’s administration.
The Nigerian government intends to review its 2020 N10.59 trillion budget, which already came with a deficit of over N2 trillion, to reflect the changes in the oil market and the impact of coronavirus on trade which has been affected due to Nigeria’s close ties with China where the virus started before spreading globally. Nigeria has recorded two cases of the coronavirus since the outbreak.