*Nigeria, Iraq Fail To Uphold Commitments To Output Cut, Says Survey
By Babajide Okeowo( The New Diplomat’s Content editor)
A trending survey findings based on a scientific survey conducted by Reuters have revealed that OPEC member countries only complied with agreed production cut by 74% in May. Recall that following escalating oil price crisis occasioned by COVID-19 shocks as well as plummeting oil prices globally caused by glut in international storage capabilities, the Organization of Oil Producing Countries(OPEC) and non-OPEC member countries including the United States, Russia and Mexico had agreed to an output cut of 9.7 million barrels of oil per day.
This deal which is fully applicable to OPEC member countries was meant to normalize the state of global oil supplies and price dynamics. However, latest news from Reuters survey data which indicate that OPEC member countries failed to fulfill their own commitments to the 9.7million barrels daily production cut with respect to May output may have triggered a fresh disagreement between Saudi Arabia and Russia as to whether to once again actually extend the production cut beyond the initial agreed timelines or terminate the deal.
The data obtained from a detailed survey findings undertaken by Reuters show that both Saudi Arabia, and other 13-members of OPEC including Nigeria and Iraq did not adhere to the production cut agreement protocols aimed at taking “9.7 million barrels of oil production per day out of the oversupplied market.”
On the whole, the data from Reuters survey reveal that the OPEC cartel carried out the following production cut : 5.91 million bpd from April levels, producing 24.77 million bpd. According to Oilprice, an energy focused platform, this data signifies “ 4.48 million bpd of the promised reduction, or 74% compliant.”
According to analysts, the possible factors that may have accounted for this failure on the part of OPEC member countries is due largely to what they called “contractual obligations with buyers given the short time-frame between the date the agreement was made and its implementation.”
However, some experts believe that while this may be true for Nigeria, the case with Iraq is one of notoriety for non-compliance with promised cuts given her history of violations.
According to Reuters findings, Nigeria did not comply with the terms of the OPEC deal as she cut only 19% of output. This latest development is coming amidst a fresh row or divided opinion between Saudi Arabia and Russia over possible extension of the production cut timelines.
The road to the deal was not quite easy. It would be recalled that OPEC+ had agreed that they will reduce their overall crude oil production by 9.7 MBPD, starting on 1 May 2020, for an initial period of two months to end on 30 June 2020.
Subsequently, and for another 6 months between 1 July 2020 to 31 December 2020, they will maintain a crude oil production cut of 7.7 MBPD. Starting from January 2021 they will maintain cuts of 5.8 MBPD for 16 months ending 30 April 2022. The agreement was expected to be valid until 30 April 2022, however, the extension of this agreement will be reviewed during December 2021.
The United States, Brazil, and Canada are expected to cut about 3.7mbpd. The rest of the G20 countries will be cutting about 1.3 MBPD. Premised upon that agreement, Nigeria was to produce 1.412 MBPD till December June 30, 2020, which will then be increased to 1.495 MBPD between July 1 and December 2020
Nigeria’s production is expected to rise to 1.579 MBPD starting from January 2021 and ending April 2022 respectively for the corresponding periods in the agreement. This is in addition to condensate production of between 360-460 KBOPD of which are exempt.