Nigeria’s minister of state for petroleum resources, Ibe Kachikwu said the country will be cutting its daily production output to support OPEC production cuts.
OPEC had over the past few weeks lobbying Nigeria and Libya to cap their production output after global crude price saw a continuing decline in the past two months.
The cessation of vandalism to oil installations and pipelines in Nigeria’s oil-rich Niger Delta has seen a surge in Nigeria’s output in the last six months.
As at the time of writing this report, NYMEX crude was trading for an average of USD45 per barrel. The news of a potential cut by Nigeria and Libya is expected to take oil back to USD50 and above territory. However, there are hiccups for OPEC and its weary members.
Should crude price near USD55 to USD60 per barrel, shale producers will find it attractive to produce, a further slide in crude price would be inevitable.
As for Nigeria, a further slide in the price of crude is a ‘no option’ for Africa’s largest economy in the middle od its worst recession in the last 20 years. The country’s external reserve was depleted beyond the current USD30 billion mark after crude oil fell below USD40 last year. A moderate output cut will help the country meet up with its USD38 per barrel budget benchmark.