OPEC+ recently agreed to expedite the release of an additional oil output, continuing its strategy of focusing on market share ahead of pricing.
OPEC+ on Sunday decided to increase oil output by 137,000 barrels per day starting next month.
It is the first portion of a larger supply tranche of 1.65 million barrels per day, which was intended to be held back until the end of the following year.
This situation is especially challenging for countries like Nigeria, Africa’s largest oil producer.
OPEC+ stated that it would gradually return all or a portion of the 1.65 million barrels, without providing a timeframe or any increments.
The oil cartel emphasized that market conditions would determine the unwinding and that, if necessary, it could even halt or undo earlier hikes. In a private statement, delegates provided further information, stating that the supply would be added monthly until September of the following year.
The group’s recent decision was made amid growing concerns that, as the northern hemisphere’s summer driving season draws to a close, the oil market is about to experience a major oversupply.
The Paris-based International Energy Agency predicts a record supply glut for the upcoming year due to rising output in the Americas, from the US and Canada to Brazil and Guyana, and declining consumption in China, which has been driving demand growth for decades.
Goldman Sachs believes Brent crude might drop to the low $50s per barrel levels next year.
OPEC+ had previously committed to restoring 2.2 million barrels per day through a series of accelerated hikes between April and September, a year ahead of schedule. OPEC+ officials have previously offered a variety of justifications for opening the taps, ranging from trying to rein in overproducing nations like Kazakhstan to caving in to Trump’s demands for reduced prices and recovering sales volumes that were given up to competitors like US shale drillers.
Nigeria’s oil blends selling below Federal Government’s benchmark
Nigeria’s 2025 budget depends on an expected crude oil price of $75 per barrel, with production set at 2.06 million barrels per day, assuming all other conditions remain constant. Current output levels for OPEC+ have pushed oil prices down, with Nigeria’s oil blends like Bonny Light trading below the FG benchmark.
- These conditions not only fall short of Nigeria’s targets but also hinder the country’s ability to meet its production volume of 1.5 million barrels per day in the early part of the year.
- This has serious consequences, as oil accounts for 80% of Nigeria’s foreign exchange and at least half of the government’s revenue.
- Nigeria’s premium crude grades, Bonny Light, Forcados, and Qua Iboe, are somewhat protected from a global price drop, at around $71 per barrel; however, the overall decline in global prices diminishes this advantage.
A sustained price drop below $75 per barrel could destabilize Nigeria’s fiscal deficit, increasing it to 4.4-4.3% of GDP and hindering efforts to finance economic diversification. Nigerian demand, driven by Dangote and improved security, has helped boost production. Nigeria has actively lobbied OPEC for a higher quota, targeting 2 million barrels per day by 2027, and the Dangote refinery’s increased output also contributes.
Nigeria seeks a higher OPEC quota due to enhanced security, though OPEC remains cautious about granting higher quotas. Improvements in Nigerian production, along with policies to fight oil theft and tax breaks, are yielding positive results. Nigeria exceeded its 1.5 million barrel per day quota in June and July 2025, reflecting the success of policies aimed at encouraging investment and boosting production.
Indian stuck on Nigerian Oil
Meanwhile, Indian Oil Corporation adhered to a pattern that reflects both geopolitical concerns and India’s practical energy security objectives by purchasing one million barrels of Middle Eastern grade crude and two million barrels of West African crude.
- One million barrels of Agbami and Usan oil grades from Nigeria were purchased from French energy company TotalEnergies, and Shell sold one million barrels of Das crude from Abu Dhabi. It is anticipated that shipments will reach Indian ports between late October and early November.
- The Nigerian cargoes were acquired free-on-board (FOB), while the Das crude was purchased delivered. While India’s move to West African oil is by no means new, the recent offer’s option to forgo US oil stands in sharp contrast to IOC’s purchase of five million barrels of US West Texas Intermediate (WTI) the week before, as reported by Reuters.
- Reports that more than two million barrels of Nigerian oil were expected to reach India surfaced just last month. This change is particularly noteworthy because India started buying a sizable quantity of inexpensive Russian oil in 2022.
New Delhi seized the opportunity to purchase oil at lower prices after Russia invaded Ukraine to avoid Western sanctions and safeguard itself against shocks to the global crude oil market. However, since late July, Indian state-owned companies have ceased acquisitions, and Indian refiners have reduced their imports from Russia because of President Donald Trump’s recent campaign to lower Moscow’s energy profits.
