OPEC moves to cap Nige­rian oil out­put, boost com­pli­ance

Kuwait Times - - BUSINESS -

OPEC moved yes­ter­day to cap Nige­rian oil out­put and called on sev­eral mem­bers to boost com­pli­ance with pro­duc­tion cuts to help clear ex­ces­sive global stocks and sup­port flag­ging prices. OPEC has agreed with sev­eral non-OPEC pro­duc­ers led by Rus­sia to cut oil out­put by a com­bined 1.8 mil­lion bar­rels per day (bpd) from Jan­uary 2017 un­til the end of March 2018.

OPEC states Libya and Nige­ria were ex­empted from the lim­its to help their oil in­dus­tries re­cover from years of un­rest. The deal to curb out­put pro­pelled crude prices above $58 a bar­rel in Jan­uary but they have since slipped back to a $45 to $50 range as the ef­fort to drain global in­ven­to­ries has taken longer than ex­pected.

Ris­ing out­put from US shale pro­duc­ers has off­set the im­pact of the out­put curbs, as has climb­ing pro­duc­tion from Libya and Nige­ria. A min­is­te­rial com­mit­tee of OPEC and non-OPEC states that mon­i­tors the global oil pact said it had agreed Nige­ria would join the deal by cap­ping or even cut­ting its out­put from 1.8 mil­lion bpd, once it sta­bi­lizes at that level from 1.7 mil­lion bpd re­cently.

The mon­i­tor­ing com­mit­tee, known as JMMC and which met in the Rus­sian city of St Peters­burg, did not give the time­frame for when this would hap­pen, say­ing it would track Nige­rian pro­duc­tion pat­terns in the next weeks. The com­mit­tee did not back cap­ping Libyan out­put as it said its pro­duc­tion was un­likely to ex­ceed 1 mil­lion bpd in the near fu­ture com­pared to its ca­pac­ity of 1.4 mil­lion1.6 mil­lion bpd be­fore un­rest erupted in 2011 and plunged the na­tion into chaos.

Brent oil prices rose about 1 per­cent at about $48.50, helped by news of a cap on Nige­ria and by com­ments from Saudi En­ergy Min­is­ter Khalid Al-Falih that the king­dom’s ex­ports would fall to 6.6 mil­lion bpd in Au­gust as de­mand at home was ris­ing, ef­fec­tively rep­re­sent­ing a cut of 1 mil­lion bpd year-on-year. He said global stocks had fallen by 90 mil­lion bar­rels, but were still about 250 mil­lion bar­rels above the five-year av­er­age for in­dus­tri­al­ized na­tions, which is the level OPEC and non-OPEC states are tar­get­ing with their out­put curbs.

Rus­sia and Saudi Ara­bia face mount­ing pres­sure to prop up oil prices. Rus­sia, which is heav­ily re­liant on oil rev­enues, holds a pres­i­den­tial elec­tion next year. Saudi Ara­bia needs higher prices to bal­ance its bud­get and sup­port next year’s planned list­ing of state oil firm Saudi Aramco.

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