With Brent Crude oil price dropping to $70, yesterday, there are concerns by oil producing countries on measures to hedge potential energy crisis that may arise with sanctions imposed on Iran by the United States.
U.S. President, Donald Trump sanction has effectively blocked over 1.9 million barrels daily (mbd) output more than the 1.2mbd the OPEC cartel targeted to cut.
Iran and Venezuela, the two nations in Trump’s crosshairs, are exempt from the Organisation of the Petroleum Exporting Countries (OPEC’s) agreement to reduce output, even as member nations have deliberately cut more than planned, as group leader Saudi Arabia deepened its curbs.
While Saudi Oil Minister, Khalid Al-Falih, has said the producer will seek to keep the market balanced, he has also signalled that OPEC and its allies including Russia, could extend output curbs until the year end.
For Nigeria, a spate of disruptions and security concerns, including kidnappings, are threatening to hinder its surging oil exports.
Royal Dutch Shell Plc, and Total SA declared force majeure (due to circumstances beyond their control) on some of their Nigerian exports over the past week, a measure that allows companies to skip supply obligations. Chevron Corp.’s Nigerian unit said an idled well was interfered with.
Nigeria’s Bonny Light Crude dropped to $73.19, while the WTI Crude followed at $61.41 a barrel as at 4.50pm local time.
Indeed, OPEC and other oil producers in the cuts pact are following developments in Venezuela and other countries to ensure an energy crisis is avoided, Secretary-General, Mohammed Barkindo, said Thursday.
“Our objective remains as an organization that we will continue to work with all member countries as well as the participating countries in the declaration of cooperation to avoid any energy crisis in the world despite current travails in several of our member countries,” Barkindo said. He refers to the agreement by OPEC and other producers led by Russia to reduce oil output.
With two OPEC members under sanctions, Iran and Venezuela, “we are conscious of the times that we have found ourselves. But the good news is that talking to all member countries we remain committed, we remain focused on our principal objective as an organisation to ensure stability at all times in the oil market, to ensure that we avoid any energy crisis that will impact on the global economy.”
In accordance with plans to draw down inventories, and remove 1.2 million b/d from global markets, OPEC cancelled a meeting in April, to re-evaluate its policy and its next meeting – a Joint Ministerial Monitoring Committee meeting will take place on May 19 in Jeddah, Saudi Arabia.
The next full OPEC meeting is scheduled for June when “all options will be reviewed,” Barkindo said.
“All I can say is that the group is committed to stay united, is committed to ensure that our objective of not returning or slipping back into the chaos that we witnessed in the market following the longest cycle that we have seen from 2014 to 2016 does not repeat itself, including the volatility that we have seen in the fourth quarter of 2018,” he added.