OPEC Moots 1m BPD Oil Output Cut

OPEC

The Organisation of Petroleum Exporting Countries (OPEC) on Thursday, agreed to another cut in production adding up to 1 million barrels per day, bpd, among its fourteen members while anticipating Russia and its allies under the OPEC+ cartel to tow a similar path by bringing production down by half a million bpd.

OPEC said the group would review the policy shift at its next meeting that has been scheduled to hold on 9th June. They are proposing new measure that will last through the second quarter of 2020 as a timely buffer to the crushing weight of the Covid 19 epidemic on global oil prices.

OPEC’s production cut ambition of 1.5 million bpd is conditional on Russia’s approval because , Russia is yet accept OPEC proposed cut and there are worries it may not. Moscow is said to favour an extension to the existing cut rather than a new measure to curb output.

Ekohotblog understands that before the new move, OPEC has been pushing for the extension of the existing cuts of 2.1 million bpd, which expires this month, to the end of the year.

OPEC said if the mooted cut succeeds, their overall production cut will come to 3.6 million bpd making it the group’s biggest cut since 2008, when it reduced production by 4.2 million bpd in the aftermath of the global financial crisis.

Iranian oil minister, Bijan Zanganeh said after the OPEC meeting today that Iran the world’s largest oil producer after Saudi Arabia, would remain exempted from the planned cut.

The Finance and Budget Planning Minister, Zainab Ahmed said Nigeria’s 2020 budget is set at an oil benchmark of $57 per barrel the budget might be reviewed in the light of the negative impact of the Coronavirus plague on oil revenue.

Speaking after the Federal Executive Council (FEC) meeting Wednesday, Ahmed said, “I am glad to inform you that our oil production as of today is two million barrels per day and at times slightly higher. That in its self will be a cushioning effect for us in the current oil price.”

However, Mrs Ahmed’s optimism seems to have taken a bashing from OPEC’s new resolve to cut output among its members and even if Russia fails to agree to the 500,000 bpd, it is probable that OPEC will proceed to cut its own production by a million bpd.

Ahmed added that the development might put further strain on Nigeria’s fiscal ambition through oil this year.

Moody’s Investor Service had earlier warned the Nigerian Government of external vulnerabilities stemming from over-reliance on oil revenue and advised that buffers be put in place to cushion the effects of shocks from the volatile global oil markets.