Following reaffirmation by countries like Saudi Arabia, the United Arab Emirates (UAE) and Iraq to comply with the decision of the Organization of the Petroleum Exporting Countries (OPEC) to cut oil production by 9.7mbpd, global oil market is expected to rebalance in two months.
This is according to statement credited to Russia’s Energy Minister, Alexander Novak recently. He predicted that oil demand and supply would rebalance in the next two months.
“For now, the surplus stands at around 7-12 million barrels per day. The energy ministry is counting on the market to balance out in June – July thanks to a consumption increase,” he said.
Similarly, last week, the International Energy Agency (IEA) said that it had seen signs that the oil market would rebalance quicker than originally expected after the United States and OPEC implemented the agreed output cut.
This development will come as a big relief to Nigeria because the rebound of oil prices and the rebalancing forecast will help reduce the country’s fiscal pressure and boost its revenue.
Recall that the Brent crude and Bonny light crude sold for about $36 per barrel and over $33 per barrel respectively. These are above the revised budget oil benchmark of $25 per barrel for the 2020 budget.
Recall also that crude oil prices and oil demand plunged over the past few months as a result of the pandemic. However, with the lifting of global lockdowns and gradual reopening of global economies, oil prices are expected to rebound.
In the meantime, OPEC+ wants to keep the existing production output cuts beyond the June expiry date as part of efforts to rebalance the market.
According to OPEC’s Secretary-General, Mohammed Barkindo, he urged OPEC+ members not to flout the output cut. He posited that OPEC+ members must remain committed to production cuts despite signs that oil demand is beginning to recover.
