Nigeria's fortunes boosted, as OPEC extends cut exemption amid oil price resurgence

24 September, 2017, 00:57 | Author: Barbara Daniel
  • By Fanny Potkin

OPEC members, together with other top producers such as Russian Federation, agreed to reduce the oversupply in the market by cutting 1.2 million barrels per day of oil production.

He said Brent futures got an additional boost in late trade when Nigeria's oil minister said in Vienna that his country, which OPEC had exempted from the output cuts, was actually pumping less crude than its agreed cap.

Oil Minister Emmanuel Ibe Kachikwu made the announcement in Vienna, where the Organization of Petroleum Exporting Countries' headquarters is located.

The oil market has been awash in crude for more than three years, and OPEC has struggled to accelerate the rebalancing effort, but the world could be heading for a supply crunch in a few years due to the sharp fall in industry spending, according to USA Today.

Elsewhere, for November delivery on the ICE Futures Exchange in London was up 8 cents or about 0.14% at $56.51 a barrel, its highest since April. "We're not too far away from that", Kachikwu said in an interview with Bloomberg television.

Hurricane Harvey dented both recently, but domestic crude oil production reached more than 9 million barrels a day in the Lower 48 states last week and exports totaled 928,000 barrels a day. If Opec doesn't extend the supply curbs beyond their current expiry at the end of March, the market will return to oversupply again, forecasts from the International Energy Agency indicate.

Kuwaiti Minister of Oil Essam al-Marzooq said after the meeting that "the process is working fine so far".

Noting recent market developments, the committee said it was confident that the oil market was moving in the right direction towards the objectives of the Declaration of Cooperation.

Oil inventories in developed economies have dropped by 170 million barrels since January and backwardation in prices demonstrates stockpiles are shrinking and demand is rising, Kuwait's Almarzooq said before the meeting yesterday.

Brent crude oil was down 35 cents at $55.94 a barrel by 1355 GMT. Opec's rules mean these figures would only be discussed internally and the so-called secondary sources production estimates-compiled from third parties and published each month-would remain the only official way for measuring compliance, the delegates said. In particular, we continue to view that while the decision to cut production to normalize inventories was rational, this strategy should be followed by a gradual increase in production to capture increasing market share and revenues in 2018.

According to traders, the US crude received some reinforcement from a compelling lure in gasoline stocks from 2.1 million barrels to 216.19 million barrels. Obviously we will not produce that.

At this its 5th meeting, the JMMC welcomed the participation of Iraq, Libya and Nigeria, and the reaffirmation of their commitment to ensure the success of the Declaration of Cooperation.

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