Saudi Prince discusses production cut deal with Buhari amid OPEC’S push for oil cuts

Saudi Arabia’s crown Prince Mohammed has held discussion with Nigeria’s President Muhammadu Buhari in a bid to ensure strict adherence to Organisation of Petroleum Exporting Countries’ (OPEC) and allies production cut deal aimed at boasting crude oil prices. Nigeria, along with Iraq, has been lagging in compliance with the production quotas set by OPEC+ in April, aiming to shave off some 9.7 million bpd in oil supply until the end of July. In fact, Iraq and Nigeria, especially Africa’s biggest oil-producing country, were so bad at compliance that Saudi Arabia’s Energy Minister had to put his foot down at the last OPEC+ meeting and demand from them that they start cutting production more deeply to improve their compliance rates. According to state-run Saudi Press Agency, Saudi Crown Prince Mohammed bin Salman and Nigeria’s President Buhari discussed “ways of cooperation to enhance the stability” of the market during a phone call on Monday. Iraq and Nigeria’s non-compliance with the record OPEC+ cuts in May nearly wrecked the June meeting of the pact, ahead of which the two leaders of the group, Saudi Arabia and Russia had insisted that there would be an extension by one month to the current level of cuts only if laggards in compliance ensured over-compliance going forward to compensate for flouting their quotas so far. Iraq and Nigeria had little choice but to agree and undertook to deepen their production cuts not just in July but also in August and September, to compensate for their under compliance in may when the deep cuts began. For now, the agreement is to cut a total of 9.7 million bpd until the end of July. According to Russia’s Energy Minister, a further extension of the deep cuts would not be needed as the market will have begun to rebalance by the end of July. Overall implementation of the OPEC+ accord has been robust, standing at 87 percent last month, and crude prices have strengthened in consequence. Brent futures was at $41.15 a barrel in London on Wednesday, having more than doubled since late April as a result of OPEC’S intervention and a revival in demand. Nigerian National Petroleum Corporation’s (NNPC) group managing director, Mele Kyari, promised on June 12 that Nigeria would commence production cuts in June and would achieve full compliance by July. Exports show Nigeria is pumping 1.38 million barrels per day; however, Nigeria’s quota to meet its production cut is 1.37 million barrels per day. It contends that some grades are a type of light oil known as condensate, rather than crude, and thus aren’t subject to OPEC targets. Nigeria has ignored calls for OPEC production cuts in the past as the country enters an economic recession that may be its worst in 40 years, caused by weak global demand for its number one export, crude oil. IMF expects the Nigerians economy to decline by 5.4% in 2020, the World Bank forecasts 4.9 million Nigerians at risk of falling into poverty this year due to the falling economy.