Nigeria has disclosed that it is prepared to make additional oil output cuts from July to September to compensate for producing more than its quota in May and June when the Organisation of Petroleum Exporting Countries and its allies implemented a massive production cut deal.
OPEC and its allies, a group called OPEC+, decided in April to cut output by a record 9.7 million barrels per day to lift prices battered by a demand drop linked to lockdown measures aimed at stopping the spread of the coronavirus.
“As OPEC meets today, Nigeria reconfirms our commitment under the existing agreement,” the Minister of State for Petroleum Resources, Chief Timipre Sylva, said on its Twitter handle on Saturday.
Sylva said the country “subscribes to the concept of compensation by countries who are unable to attain full conformity (100 per cent) in May and June to accommodate it in July, August and September.”
As OPEC meets today,
Nigeria reconfirms our commitment under the existing agreement;
Subscribes to the concept of compensation by countries who are unable to attain full conformity (100%) in May and June to accommodate it in July,August and September. pic.twitter.com/V8EWYYtrfQ
— H.E. Chief Timipre Sylva (@HETimipreSylva) June 6, 2020
OPEC+ agreed to a one-month extension of its record output cuts on Saturday and adopted more stringent methods to ensure members don’t break their production pledges, Bloomberg reports.
The delegates at the videoconference said all nations had agreed to the new deal. The group will maintain its production cut of 9.7 million BPD to the end of July, instead of easing it to 7.7 million after this month as planned.
According to the meeting’s draft communique, any member that doesn’t implement 100 per cent of its production cuts in May and June will make extra reductions from July to September to compensate for their failings.
Oil has just posted a sixth weekly gain, more than doubling to $42.30 per barrel since April as traders anticipate tighter supplies as demand recovers from the coronavirus lockdowns.
The Secretary-general of OPEC, Mohammad Barkindo, said, “The productions adjustments agreed in April are by far the largest and longest in the history of OPEC, OPEC+ and the global oil industry.
“The unparalleled commitment and the unity and courage for the common cause of oil market stability has been positive.”
The United States President Donald Trump on Friday praised the cuts from OPEC and its allies for saving the American energy industry.
“Despite the progress achieved to date, we cannot afford to rest on our laurels. The challenge that we face remains daunting,” Mohamed Arkab, Algeria’s energy minister and current OPEC president, said at the start of the meeting.
The group plans to build on its success by pushing the market into a supply deficit next month, using a price structure called backwardation to start to chip away at the billion barrels of oil stockpiles that built up during the pandemic.
The organisation will meet again in the second half of June for another review of the oil market. Talks are scheduled on June 18 for the Joint Ministerial Monitoring Committee, which could recommend a further extension if it’s deemed necessary, pushing the deep production cuts into August, a delegate said.
The panel will meet every month until December, according to the draft communique.