The Organisation of the Petroleum Exporting Countries Plus (OPEC+) will consider loosening the grip on crude oil price as it skyrockets to its highest in a year after crashing to the oil price war and COVID-19 last year.
OPEC+, which is an ally of OPEC, have a meeting on March 4, where members will discuss increasing oil production, following the impact of production cut on oil price, which now trades at $67.24 per barrel.
In order to strengthen crude oil price after the crash in April, OPEC and OPEC+ members agreed to cut down on oil production level, with the latest being March. This decision has continued to aid the recovery of oil price in the global market – with supply short of meeting demand, oil price is pushed up.
As the oil price continues to rise, it leads to costly fuel price in Nigeria and other crude-dependent countries. So OPEC+ will deliberate on flooding the market, in a bid to temper oil price surge.
The last cut saw Russia easing production level by 65,000 bpd and Kazakhstan cutting production by 10,000 bpd, oilprice disclosed. If increase in oil production is agreed, it is expected to take effect in April and production quotas will be in hundreds of bpd – Russia is fighting for a boost.
Possibility of Saudi Arabia, an OPEC member, increasing its production level after March is also lingering as the country also partook in the cut exercise, dropping one million bpd. If Saudi Arabia end production cut, it could pump about a million bpd into the oil market.
Meanwhile, Nigeria has also complied with production cut in recent months, as compensation cut following refusal to cut down in early 2020. As of December, Nigeria cut down by 70,000 bpd, to 1.43 million bpd, below its 1.495 million bpd quota, according to S&P Global Platts OPEC+ survey.
In January, production dropped again to 1.38 million bpd, although, some of the cut was caused by pipeline leaks, which forced suspension of deliveries of Forcados crude by Royal Dutch Shell Plc and force majeure declared by Exxon Mobil Corp. for its Qua Iboe facility.
But the country might reverse production cut, as Financial Derivatives boss, Bismarck Rewane, said the country needs to improve on its production output to assist its struggling economy which just exited recession by 0.11 percent.
Ripples Nigeria had previously reported that Rewane factored boost in oil production as a weapon in combating rising inflation, which is 16.47 percent in January, rising from 15.7 percent in December.
The rising inflation has negatively impacted on cost of living in Nigeria, affecting purchasing power of citizens as goods and service price skyrocket amid rising unemployment.
“Basically, what the Central Bank has to do, because they are the Monetary policy authority, is to ensure two things, one, increase the volume of oil put in the market, and two, begin to increase interest rate across the board.” Rewane said.
By Fakoyejo Olalekan…