Brent Crude oil prices dropped to as low as $82 per barrel for the first time since January 2022, after reports suggest that Opec could be considering an increase in output.
An increase in crude oil output is often considered a signal that prices could drop in the near terms
A Wallstreet journal report had indicated that there were ongoing talks between Saudi Arabia and other members of the Opec to consider a ramp-up in output by about 500,000 barrels per day when it meets on December 4th.
Denials: However, late Monday, Saudi Energy Minister, Prince Abdulaziz bin Salman, categorically denied reports that Saudi Arabia is discussing with other OPEC producers an output increase of 500,000 barrels per day.
- This is according to Amena Bakr, chief OPEC correspondent through her official Twitter account.
- “If there is a need to take further measures by reducing production to balance supply and demand, we always remain ready to intervene,” Amena wrote, quoting Prince Salman.
- On October 5, 2022, when the Brent crude price was at $93.25, OPEC agreed to cut crude oil production by 2 million barrels per day from the month of November 2022.
- The decision was taken due to the uncertainty surrounding the global economy and oil market outlooks and the need to enhance the long-term guidance for the oil market.
The Nigerian context: Nigeria is grappling with meeting its Opec quota due to massive crude oil thefts and several other production challenges.
- The result is lower government revenues which have resulted in widening budget deficits and reliance on the central bank to fund the government.
- Thus, falling crude oil prices could worsen an already bad situation for Nigeria
- Apart from the risk of widening fiscal deficits, Nigeria’s central bank relies heavily on crude oil prices to shore up its external res
- For example, data from the Central Bank of Nigeria shows that the country’s external reserves fell to fell to $37.17 billion as of November 15, 2022, a one-year low
Weighing in: As an oil and gas analyst, Dan. D Kunle told Nairametrics on Monday, Nigeria recording over a million barrels of crude oil production in October 2022, for the first time since July 2022, is not worth celebrating.
- According to Kunle, Nigeria can do so much better in crude oil production, “in fact, we should be producing up to 3 million barrels per day in Nigeria,” Kunle noted.
Back-Up: Oil prices rebounded after the drop to about $87 per barrel as the market reacted to the denial by Saudi.
- This was also helped by comments from Saudi Energy Minister Prince Abdulaziz bin Salman that the current 2 million barrels per day will remain.
- “The current cut of 2 million barrels per day by Opec+ continues until the end of 2023 and if there is a need to take further measures by reducing production to balance supply and demand, we always remain ready to intervene,”
