Oil Hits $62 as OPEC, Al­lies Agree to Cut Pro­duc­tion By 1.2mbd

Kachikwu: Nige­ria will re­duce pro­duc­tion by 40,000bd FG pro­poses N8.6trn Bud­get for 2018

THISDAY - - FRONT PAGE - Chika Amanze-Nwachuku in La­gos, Chineme Okafor in Vienna, Aus­tria and Shola Oyeyipo in Abuja with agency re­port

The Or­gan­i­sa­tion of Petroleum Ex­port­ing Coun­tries (OPEC) and its al­lies agreed yesterday to cut oil pro­duc­tion by 1.2 mil­lion bar­rels per day, ow­ing to a record global crude glut and the need to halt the price slump.

This is com­ing on the heels of the ap­proval of a bud­get pro­posal of N8.6 tril­lion for 2019 by Pres­i­dent Muham­madu Buhari.

OPEC and al­lies ended their meet­ings in Vienna yesterday with an agree­ment for mem­ber coun­tries to re­duce out­put by 800,000 bar­rels a day and al­lied pro­duc­ers to cut by 400,000 bar­rels a day, with Rus­sia con­tribut­ing as much as 230,000bd of this.

The group will col­lec­tively curb pro­duc­tion by 1.2 mil­lion bar­rels a day, higher than the 1 mil­lion bar­rel-a-day sce­nario that was ear­lier floated, Bloomberg re­ported.

The larger-than-ex­pected deal to re­duce out­put saw the Brent crude, the global oil benchmark, jump 4.5% to $62.76 a bar­rel on Lon­don’s In­ter­con­ti­nen­tal Ex­change.

West Texas In­te­me­di­ate fu­tures, the U.S. oil stan­dard, were up 3.8% to $53.42 a bar­rel on New York’s Mer­can­tile Ex­change. Both bench­marks were near their high­est points in two weeks.

Crude oil has steadily dropped since early Oc­to­ber amid con­cern over grow­ing sup­plies and as the U.S. is­sued waivers ex­empt­ing some nations from ad­her­ing to im­posed sanc­tions on Ira­nian crude.

Minister of State for Petroleum, Dr. Ibe Kachikwu, told THIS­DAY that Nige­ria could con­trib­ute up to 40,000b/d out of the 800,000b/d, rep­re­sent­ing about 2.5 per cent of her 1.7mil­lion bar­rels per day mb/d cur­rent pro­duc­tion level.

Kachikwu, ex­plained that the out­put cut was as a mat­ter of fact in the best in­ter­est of Nige­ria, adding that with larger oil vol­umes in the mar­ket weak­en­ing prices, Nige­ria would have found it dif­fi­cult to im­ple­ment its bud­get for 2019.

The minister, who had ini­tially in­di­cated Nige­ria will not seek an ex­emp­tion but will com­mit to the cut, ex­plained that the group did the right thing and avoided a po­ten­tial catas­tro­phe that would have hit pro­duc­ers and the oil in­dus­try.

He said: “There were a lot of dif­fi­cul­ties in get­ting all the par­ties to­gether whilst ev­ery­body were will­ing to cut, we knew the mar­ket fun­da­men­tals en­sured we had to, we had ex­cess of 1.3 mil­lion bar­rels, we need to take that off the mar­ket.

“As long as Rus­sia would match us, there was the will­ing­ness to do that but the is­sue was some coun­tries were not will­ing to do that, Nige­ria like you know got ex­emp­tion three times and the nat­u­ral thing was this time no­body should get an ex­emp­tion and we had to nav­i­gate that be­cause there were coun­tries who had gen­uine rea­sons.”

On what Nige­ria would give up, he said: “The av­er­age is about 2.5 per cent flat re­duc­tion for ev­ery pro­duc­tion and so if you take (that) out from 1.7 mil­lion bar­rels that prob­a­bly trans­late to 40,000 bar­rels per day.”

Asked if the cut had any im­pact on Nige­ria’s bud­get with re­gards to pro­duc­tion vol­ume, he said: “It has but has the po­ten­tial of sav­ing your bud­get mat­ter of fact, be­cause if we don’t, prices were al­ready slid­ing, yesterday prices dropped by five per cent and were about $58 or $59 and if we don’t reach a res­o­lu­tion, it could be down to $40.

“If you look at the value of 40,000 bar­rels ver­sus the gap of earn­ing $70 per bar­rel - I would imag­ine that prices would hover around $65 or more, and if we didn’t do that, the bud­get will be dead. This was a sav­ings mech­a­nism to hold the money than hold­ing the bar­rels. Tech­ni­cally, Nige­ria is not af­fected; it is a win for Nige­ria.”

Fur­ther de­tails of the agree­ment as stated by the Pres­i­dent of the OPEC Con­fer­ence and Minister of En­ergy and In­dus­try of the United Arabs Emi­rate, Mr. Suhail Mo­hamed Al Mazrouei, and Rus­sian En­ergy Minister, Alexan­der No­vak, at a press con­fer­ence af­ter their joint meet­ing showed that Iran; Venezuela; and Libya were granted ex­emp­tions from the cuts be­cause they ei­ther suf­fered sanc­tions or pro­duc­tion dis­rup­tions, and would not be able to par­tic­i­pate in the cut.

Mazrouei ex­plained that the meet­ing dis­cussed the in­creas­ing mar­ket volatil­ity and the broad con­sen­sus on the prospects for 2019 that sug­gest higher sup­ply growth than global re­quire­ments, tak­ing into ac­count pre­vail­ing un­cer­tain­ties.

“In view of the cur­rent fun­da­men­tals and the con­sen­sus view of a grow­ing im­bal­ance in 2019, the Con­fer­ence de­cided to ad­just OPEC over­all pro­duc­tion by 0.8mbd from Oc­to­ber 2018 lev­els, ef­fec­tive as of Jan­uary 2019, for an ini­tial pe­riod of six months, with a re­view in April 2019,” said Mazrouei.

He fur­ther stated that the Joint Min­is­te­rial Mon­i­tor­ing Com­mit­tee (JMMC) of the par­ties will mon­i­tor timely and fair im­ple­men­ta­tion of the pro­duc­tion cuts res­o­lu­tion and re­port back on a reg­u­lar ba­sis. FG Pro­poses N8.6trn Bud­get for 2018 Mean­while, Pres­i­dent Muham­madu Buhari has ap­proved a bud­get pro­posal of N8.6 tril­lion for 2019.

The ap­proval was granted yesterday dur­ing a spe­cial Fed­eral Ex­ec­u­tive Coun­cil (FEC) meet­ing presided over by the Pres­i­dent, which lasted al­most three hours.

The Minister of Bud­get and Plan­ning, Mr. Udoma Udoma had in Novem­ber an­nounced that the fed­eral gov­ern­ment was con­sid­er­ing a leaner 2019 bud­get of N8.6 tril­lion, which is thin­ner than the N9.1 tril­lion ap­proved by law­mak­ers for 2018.

Re­call that the minister who spoke dur­ing a con­sul­ta­tive fo­rum on the medium term ex­pen­di­ture frame­work and fis­cal strat­egy pa­per 2019-2021, said the de­ci­sion to adopt a leaner 2019 bud­get was due to re­duced gov­ern­ment revenue pro­jec­tion for the year.

He also said gov­ern­ment planned to cut down the level of bor­row­ing from N1.6 tril­lion in 2018 to N1.5 tril­lion in 2019, while the deficit com­po­nent would be re­duced from N1.9 tril­lion in 2018 to N1.6 tril­lion in 2019.

“The N8.6 tril­lion Bud­get 2019 pre­sented by the Min­istry of Bud­get and Plan­ning was ap­proved by FEC,” said a source at the meet­ing.

Udoma, who spoke with state house cor­re­spon­dents af­ter the spe­cial FEC meet­ing yesterday, said the coun­cil would li­aise with the Na­tional Assem­bly to fix a date when the pres­i­dent will present the draft bud­get for the con­sid­er­a­tion of the Se­nate and the House of Representatives.

“The fed­eral ex­ec­u­tive coun­cil has ap­proved the 2019 bud­get pro­posal and the de­tails will be pre­sented to a joint ses­sion of the na­tional assem­bly on a date to be fixed by the law­mak­ers,” Udoma said.

Udo-Udoma stated that the next stage was to li­aise with the Na­tional Assem­bly to pick a date for the pre­sen­ta­tion of the es­ti­mates by Buhari.

He said: “It will be pre­sented to the Na­tional Assem­bly; we will have to con­sult them in terms of the date of that pre­sen­ta­tion. The bud­get is the Pres­i­dent’s bud­get; it is the Pres­i­dent that presents it; I would be usurp­ing his au­thor­ity if I gave fur­ther de­tails. We are hop­ing to be in touch with the Na­tional Assem­bly as soon as pos­si­ble.

“They have to agree to the date they will re­ceive the bud­get. We are go­ing to be in touch with them im­me­di­ately; but the bud­get is ready. If I spec­u­late on that, I will be en­croach­ing on the role of the Na­tional Assem­bly.’’

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