Nigeria poised to benefit from Opec plans to slash global crude oil production

NIGERIA could soon enjoy an increase in revenue as a result of higher crude oil returns as the Organisation of the Petroleum Exporting Countries (Opec) is planning to cut output in a bid to rally global prices.

Major oil-producing nations led by Saudi Arabia and Russia are moving towards an agreement to further slash production to prop up volatile prices. Ministers from the 13-member Opec and its 10 partners led by Russia have agreed to further cut production by between 600,000 and 1m barrels a day.

Saudi Arabia is expected to roll over its existing voluntary cut of 1m barrels per day into 2024 and oil prices rallied at the prospect of fresh cuts, with Brent crude up by 1.3%. Amid stuttering global economic growth, analysts had largely expected Opec + producers to extend or deepen production cuts into next year to halt the recent slump in prices.

Intense negotiations have continued in recent days as Saudi Arabia, which has borne the brunt of the cuts, sought to convince African countries to chip in by accepting lower production quotas. Angola and Nigeria were among those countries reluctant to sign up, seeking to step up production to secure foreign currency.

Since the end of 2022, Opec has implemented supply cuts of about 5m barrels per day (bpd). It initially slashed some 2m barrels in their first in-person meeting after the Covid pandemic and then in May this year, it implemented more cuts by nine members totalling 1.6m bpd.

A month later, Riyadh announced it was to take a further 1m barrels off the market, a decision extended month by month until the end of 2023 and followed to a lesser extent by Russia. However, investors have warned that cutting production might not be enough to prevent prices from plummeting.

Oil prices are far from the near $140 a barrel peak reached after the Russian invasion of Ukraine. However, they remain above the average of the last five years, currently hovering at around $80 per barrel after nearly striking $100 in September.

Concerns among producers persist about demand softening owing to slowing economies, particularly China, the world’s biggest importer of crude. Nigeria is one of those Opec members wholly dependent on crude oil for its survival.