Minister of State (Petroleum) Ibe Kachikwu yesterday hinted of plans by the Organisation of Petroleum Exporting Countries (OPEC) to impose some kind of “soft” targets on Nigeria and Libya on the basis of their average production this year. He was quoted by Financial Times as saying on the sidelines of the ongoing OPEC meeting in Vienna, Austria
that OPEC was discussing “soft targets” of around 1.8 million bpd for Nigeria and 1 million bpd for Libya, and talks continued on how to phrase those numbers as “indicative” and not include them as hard targets in the final OPEC statement.
Iran’s Oil Minister Bijan Zanganeh said OPEC is bringing Libya and Nigeria- the exempt members – into the fold with contributions to the efforts to erase the oversupply. He said the two African producers had agreed to cap their production at a collective level of less than 2.8 million bpd. A delegate told Reuters that OPEC talks ended in Vienna with an agreement to extend the production cut deal through the end of 2018.
Going into the meeting, OPEC was expected to review the production numbers and targets of Libya and Nigeria, but, according to sources and analysts, it was uncertain whether the cartel would impose quotas or caps on the two African producers due to the still-tentative recovery and possible return of sudden outages due to militancy. Still, some kind of ‘loose’ or ‘soft’ targets were being aired as a possible outcome. Even though Libya and Nigeria have higher production targets than the recent highs of their production at 1 million bpd and 1.8 million bpd, they face security, technical, and financial constraints in growing production much higher.
Still, the fact that the two African countries agreed to cap at recent highs, not at the higher production targets, is a significant sign that they have been asked or persuaded to contribute to the deal, at least in some form. OPEC and its partners, including Russia, agreed to extend oil-production cuts to the end of 2018 and included Libya and Nigeria in the deal for the first time.
Iraq’s Oil Minister Jabbar Al-Luaibi confirmed the decision after a day of talks that reflected a rare consensus between members of the Organisation of Petroleum Exporting Countries and its allies. All agreed that the market is moving in the right direction, but is not yet balanced. After some initial hesitation, Russia supported the accord that will result in nations accounting for more than half the world’s oil supply restraining output for two years. Russia had previously sought assurances on how and when the agreement would be phased out, people involved in negotiations said earlier this week.
The country needs greater clarity than most OPEC members because its economic policy making is more complex, including a floating exchange rate that fluctuates with the oil price. It will be premature to talk about an exit strategy because OPEC and its allies are relying on oil demand in the third quarter of 2018 to finally eliminate the inventory surplus, Saudi Oil Minister Khalid Al-Falih said before the meeting. But the kingdom is open to discussions about how the group could wind down the cuts “very gradually” once its goals are achieved, he said. OPEC ministers didn’t have a detailed discussion about the mechanism that will be used to review the deal in June, Zanganeh told reporters. He also said Nigeria and Libya had agreed to a collective output cap of 2.8 million barrels a day. Nigeria pumped 1.73 million barrels a day in October and Libya 980,000 a day, according to data compiled by Bloomberg.
Senate shifts MTEF passage
The Senate yesterday postponed till Tuesday, the passage of Medium Term Expenditure Framework (MTEF), which covers 2018 to 2020. The postponement followed a motion by Senate LeaderAhmed Lawan. The upper house agreed to step down the MTEF document until Tuesday when it would have known the OPEC benchmark. Deputy Senate President Ike Ekweremadu, who presided over plenary, urged lawmakers to support the motion to enable the Upper Chamber to take informed decisions.