…To 1.829 million bpd
The price of brent crude — international oil benchmark — dropped by $1.2 to $72.39 per barrel early Monday, less than 24 hours after the Organisation of Petroleum Exporting Countries, (OPEC) and non-OPEC Ministers agreed to increase oil production at a virtual meeting, Sunday.
At the 19th OPEC and non-OPEC Ministerial meeting, members reached an agreement to increase crude oil production by 400,000 barrels per day.
With the agreement, Nigeria’s oil output is expected to hit 1.829 million barrels per day, mb/d, the quota approved for the country by the oil bloc.
The new quota marks about 30.6 per cent increase in production for the country when compared to the 1.4 mb/d, excluding condensate, currently being produced by Nigeria.
The new production agreement will take effect from 2022.
According to a statement by OPEC, member countries reached a decision “to adjust upward their overall production by 0.4mb/d (million barrel per day) on a monthly basis starting August 2021 up until phasing out the 5.8mbd production adjustment.
“And in December 2021 (they will) assess market developments and participating countries’ performance.”
The New Diplomat recalls OPEC+ had last year cut production by a record 10 million barrels per day (bpd) amid a pandemic-induced slump in demand, leading to a collapse in prices. Though the bloc has gradually raised supply since the 2020 lockdown, it has maintained a reduction of about 5.8 million bpd.
Meanwhile, following the agreement on Sunday, from August until December 2021 the bloc said it would increase supply by a further 2 million bpd or 0.4 million bpd a month, noting that it aims to fully phase out cuts by around September 2022.
‘What’s In It For Nigeria?’
For Nigeria, which relies heavily on crude oil for about 50 per cent of government revenues and over 90 per cent of export earnings, an increase in oil output coupled with the rising oil price means more revenue for Africa’s largest economy, still under the shackles of the pandemic crisis.
Already, the upturn in the price of the international oil benchmark, Brent crude, has pushed Nigeria’s oil revenue above the estimate in the 2021 budget.
Brent, against which the country’s crude oil is priced, has been trading more than $20 higher than the Federal Government’s benchmark for this year’s budget in recent months.
The 2021 budget, signed by President Muhammadu Buhari, on December 31, was based on an oil price benchmark of $40 per barrel and a production level of 1.86 million barrels per day.
According to the budget, 30 per cent (N2.01tn) of projected revenues is to come from oil-related sources while 70 per cent is to be earned from non-oil sources.